Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Rhodesia

Mr. Chapman: asked the Lord Privy Seal if he will make a statement on the progress being made towards a ceasefire and new elections in Zimbabwe-Rhodesia, following the appointment of Lord Soames as Governor.

Mr. loan Evans: asked the Lord Privy Seal what arrangements have been made to hold elections in Zimbabwe-Rhodesia.

The Lord Privy Seal (Sir Ian Gilmour): The ceasefire in Rhodesia came into effect at midnight on 28 December. Rhodesian forces disengaged and deployed to the vicinity of their company bases. Some 20,000 members of the Patriotic Front's forces have subsequently gathered with their arms at designated assembly points. A number of breaches of the ceasefire have been reported. These have mostly been attributable to elements of Mr. Mugabe's forces. The Governor has taken appropriate steps to deal with breaches of the ceasefire in accordance with the, Lancaster House agreements. Cross-border liaison arrangements have been made between the monitoring force and the defence forces of Zambia, Mozambique and Botswana. These are working satisfactorily. Zambia and Mozambique have opened liaison offices in Salisbury. The House will wish to pay tribute to the skilful and courageous performance of the monitoring force during this difficult period.
The Governor has announced that elections for the white roll seats will take place on 14 February and those for the common roll seats on 27 to 29 February. Registration of parties for the election was completed on 14 January, and nominations have to be in by 21 January. The election commissioner and his staff are supervising preparations for the elections.

Mr. Chapman: I thank my right hon. Friend for that reply. While appreciating and acknowledging the difficult, dangerous and unique combined military and civil operation now under way in Zimbabwe-Rhodesia—and in no way wishing to belittle or exaggerate any recent problem or tragedy in the last three weeks—may I ask my right hon. Friend to give the House some reassurance about how the Administration intend to deal with possible intimidation of voters, especially in the scattered rural areas?

Sir I. Gilmour: My hon. Friend will be aware that intimidation is forbidden by the Lancaster House agreements and it will be for the Governor, his staff and the police to see that intimidation does not occur. It is impossible to abolish it completely, but the Governor will do everything in his power to see that it is kept to a minimum.

Mr. Evans: Will the right hon. Gentleman assure the House that South African troops have been withdrawn from Zimbabwe-Rhodesia? If they have not been withdrawn, will he assure us that they will not be allowed to interfere with the election process, and that all the parties involved in the election will be allowed access to the broadcasting media? Is the right hon. Gentleman disturbed by the comments made by the front-line Presidents to the effect that there should be complete impartiality in these matters?

Sir I. Gilmour: I cannot assure the House that all South African troops have been withdrawn because, as the hon. Gentleman knows, the Governor has reviewed the situation and has decided that a small contingent of South African forces is required to guard the Beit bridge. The Governor will keep this matter under review. The bridge is half South African


property. On the question of broadcasting, an official from the BBC visited Zimbabwe-Rhodesia. The Governor is observing the broadcasts carefully and, here again, it is laid down in the Lancaster House agreements that there should be impartiality. So far I have heard no complaints.

Mr. Emery: Will my right hon. Friend ensure that the tribute of the House to General Acland and the British and Commonwealth forces is not merely recorded here but is actually transmitted? Secondly, will he deal with what seems to me a small problem that has been built up to major proportions, namely, the small contingent of South African forces which is on one side of the bridge—

Mr. Alexander W. Lyon: Why?

Mr. Emery: —which is considered incorrect? Is it not possible for the Commonwealth monitoring forces to be there? It seems that this matter is greatly exaggerated in the eyes of many coloured people.

Sir I. Gilmour: I am grateful to my hon. Friend, and I shall certainly see that the tribute is sent out to General Acland. I also entirely agree with my hon. Friend that this matter has been greatly exaggerated. We made clear at the Lancaster House conference that there will be no external intervention or involvement in Rhodesia at this period, and we are in touch with the Governor to ensure that this is so. But I cannot accept that a small South African presence to defend Beit bridge amounts to external intervention. All that is required is the protection of the bridge, which is a joint venture. I can assure my hon. Friend that there is a monitoring force very close to the bridge which monitors what goes on.

Mr. Shore: I am sure that the whole House will welcome the progress which has been made so far towards the difficult goal of acheiving an effective ceasefire and taking the first and very important steps towards holding elections, which we trust will be free and fair. May I turn to two questions, one of which has just been raised by the hon. Member for Honiton (Mr. Emery) and my hon. Friend the Member for Aberdare

(Mr. Evans)? The question of the safeguarding of Beit bridge is difficult. We know very well that it is a crucial installation and therefore it must be properly protected. There should be no doubt in anyone's mind about that. The right hon. Gentleman will know better than most that a specific pledge was given at the Lancaster House conference, and in the House on 18 December he said:
…there will be no foreign forces in Rhodesia."—[Official Report, 18 December 1979; Vol. 976, c. 309.]
In the light of the need to keep good will and general acceptability and to build up trust, it does not make sense to do what is being done. I am in favour of using either the direct Rhodesian security forces to secure the Rhodesian side of the bridge or of using any Commonwealth or other forces which are available. Does not the right hon. Gentleman understand—he surely must—the legitimate and reasonable sensitivity that there is about this matter, particularly in the light of his own strong words and the pledges which he has given?

My second question—

Mr. Eldon Griffiths: Too long.

Mr. Shore: All right—I shall put it quickly.
In terms of the ceasefire arrangements, is the Lord Privy Seal satisfied that enforcement is in the first instance by the forces of the two sides and, where an infringement takes place, does he agree that that process ought to precede any attempt to call out the security forces, which should be the last resort? Is he satisfied that that procedure is being followed?

Sir I. Gilmour: The answer to the right hon. Gentleman's second question is that that is in fact what happens, and the Patriotic Front commanders are invariably, if time allows, contacted before anything happens. As regards the right hon. Gentleman's welcome to what is going on, I think that the House will be interested to hear one figure which puts a good deal of the reports of the past few days into perspective. The total number of people killed in Rhodesia since the ceasefire is the same as the number killed daily before the ceasefire. That again calls for considerable congratulations to all concerned—to the Governor, the monitoring


force, the Rhodesian forces and the Patriotic Front.
I have already said what I have to say about Beit bridge. I cannot accept that the presence just across the border of a very small detachment of South Africans can be said to be a foreign involvement in Rhodesia. [HON. MEMBERS: "No."] As I have said, this is also monitored by the monitoring force, and the Governor will, of course, keep this situation under review. We hope that, before independence, the need for special measures to defend the bridge will have disappeared.

Mr. David Steel: May I join right hon. and hon. Members on both sides in pressing the Government to look again at this question? Is it not normal practice, where there is a crossing point between any two States, that each side is guarded by the respective State? Why is that normal rule not being followed here? Does not the right hon. Gentleman accept that this is a provocative irritant in an otherwise possibly successful ceasefire settlement?

Sir I. Gilmour: With respect, I must ask the House to look at this matter with some sense of proportion. Let us look at what has happened since the Governor took over. The ceasefire has been established; the monitoring force is deployed; a large number of the Patriotic Front forces have been assembled, with very few incidents involving the forces of both sides; restrictions on political parties have been lifted and arrangements for elections are well in hand; the majority of ZANU and ZAPU political leaders have returned; relations with neighbouring countries have been normalised; plans for the return of refugees are well advanced and it is hoped that movement will start next week; internal restrictions have been greatly relaxed; many detainees have been released, while the cases of the remainder are being reviewed, and a general amnesty has been declared.
Those are remarkable achievements in a very short time, and it seems to me extraordinary that, instead of concentrating on that, the House should concentrate entirely on a very small detachment of South African troops.

Several Hon. Members: rose—

Mr. Speaker: Order. This matter comes up again.

Cyprus

Mr. Dubs: asked the Lord Privy Seal if he will invite the Foreign Minister of Cyprus to London.

Sir Ian Gilmour: The Foreign Minister of Cyprus is always welcome in London, and I look forward to seeing him here soon.

Mr. Dubs: Does the Lord Privy Seal agree that there is a need for a new initiative on Cyprus? Does he also agree that it is primarily Britain's responsibility to try to achieve a settlement in that country, and will he tell the House what plans he has to do that?

Sir I. Gilmour: I am not sure that now is the best moment for an initiative. I certainly agree that an initiative of some sort is welcome, but intercommunal talks under the Secretary-General of the United Nations remain, I am sure, the only practical means of progress towards a settlement. Some small progress was made last summer and then other events intervened. We continue to give the fullest support to Dr. Waldheim's efforts, and if we see any opportunity to take an initiative ourselves we shall take it. At present, I do not see that opportunity.

Mr. Christopher Price: Is the right hon. Gentleman aware that Dr. Waldheim said before Christmas that there was some hope of restarting intercommunal talks this month, that is, in January this year? What has changed in the meantime to put that back? Did the right hon. Gentleman's last reply mean that he does not see any chance of the intercommunal talks taking place in the first half of 1980?

Sir I. Gilmour: I did not say that. I said that I did not see any prospect of an immediate initiative by this country. As regards the first part of the hon. Gentleman's question, I think that the reason for delay was merely events elsewhere in the world.

British Engineering (Overseas Representation)

Mr. Norman Atkinson: asked the Lord Privy Seal if he is satisfied with the current state of representation given to British engineering overseas via British embassy, facilities; and if he will consider the setting up of a Foreign Office-sponsored international engineering bureau for


the purpose of co-ordinating British engineering developments and industrial growth with world-wide sales initiatives so as to ensure full integration between international banking and credit facilities, United Kingdom engineering manufacture and the successful sale or leasing of British engineering products overseas.

The Minister of State, Foreign and Commonwealth Office (Mr. Nicholas Ridley): We are satisfied that British embassies take proper account of the overseas interests of British engineering. The question of departmental support in setting up an international engineering bureau is a matter for my right hon. Friends the Secretaries of State for Industry and for Trade.

Mr. Atkinson: Would the Minister of State give support to such a concept? Does he agree that now is the time when initiatives of this sort worldwide should be taken in order to enhance the efforts of British engineering to sell its products overseas? Although the whole House would pay tribute to the services now offered and given by British embassies throughout the world, is it not a fact that they remain unco-ordinated and there is, therefore, a need for a fresh look at the trade services and facilities offered by the Foreign Office so that they may be improved and linked with the efforts being made in this country?

Mr. Ridley: There are about 750 United Kingdom-based and senior locally engaged officers employed on export promotion at more than 200 posts in more than 100 countries. I believe that they do excellent work, and I am grateful for the tribute which the hon. Gentleman paid to them. As to whether there should be co-ordination, that, as I have said, is a matter not for me but for my right hon. Friends.

Secretary of State Vance

Mr. Temple-Morris: asked the Lord Privy Seal if he has any plans to meet Secretary of State Vance.

Mr. Ridley: My right hon. Friend has no immediate plans for a meeting with the United States Secretary of State.

Mr. Temple-Morris: Does my hon. Friend agree that the effectiveness of the

proposed United States trade boycott of Iran depends very much upon the co-operation of Europe and Japan? Will his right hon. Friend make that clear to the Secretary of State when they next meet? Does my hon. Friend agree that there have to be steps to support the position of the United States in practice rather than merely verbally, which the Government have done so far?

Mr. Ridley: My hon. Friend will know that the Russians vetoed the United Nations sanctions motion. My right hon. Friends are considering, along with our European and other allies, what they can do to show solidarity and to express the world's disapproval of the detention of the American hostages. We shall do everything possible to secure the release of the hostages.

Mr. Cook: Does the Minister recollect that when his hon. Friend the Minister of State was answering questions on the statement on Afghanistan on Monday he stated that no agreement had been concluded with the United States on the expansion of the base at Diego Garcia? Are we to take it from that reply that such an agreement is under discussion? If so, what arrangements are the Government making to embody the views of countries around the Indian Ocean, such as India, which have previously opposed such expansion?

Mr. Ridley: All the factors that the hon. Gentleman has mentioned are taken into consideration. I have nothing to add to what my hon. Friend said on Monday.

Mr. Biggs-Davison: Has Mr. Vance been told that the refusal to sell arms required by the Royal Ulster Constabulary for its protection and that of Her Majesty's subjects is an unfriendly act towards an ally that is giving President Carter and his Administration considerable support?

Mr. Ridley: My right hon. Friend the Prime Minister made that point of view abundantly clear during her visit to Washington, and to the President shortly before Christmas. What she said to the House on her return made it clear that she shares, as I do, my hon. Friend's view.

Mr. Shore: When the right hon. Gentleman meets the United States Secretary


of State will he make it plain to Mr. Vance that we share American feeling about the outrage that is continuing against the personnel of the United States Embassy in Tehran? Was this dangerous and, in my view, intolerable situation discussed at yesterday's meeting of NATO at Brussels, and if so, with what effect?

Mr. Ridley: I am grateful to the right hon. Gentleman for those comments, which express entirely the Government's view about the continued detention of the American hostages in Tehran. I assure him that there has been no lack of activity to try to co-ordinate action, both in Europe and with our American allies, on what should be the next stage of the response after the failure of the United Nations motion.

Rhodesia

Mr. Maxton: asked the Lord Privy Seal what staff will be attached to the Governor of Rhodesia in Salisbury to deal with aid and development planning and co-operation during the transitional period.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Richard Luce): There are no staff attached to the Governor specifically for this purpose. But senior officials from the Overseas Development Administration visited Salisbury from 8 to 12 January to make a preliminary assessment of Rhodesia's aid requirements.

Mr. Maxton: I am glad that those staff have gone to Rhodesia to take account of the situation there. Will the Minister make an announcement to the House on the level of aid that the Government propose to make available to Zimbabwe following the elections? Will he make that announcement now, or at least before the elections, and give an assurance to the House that the level of aid will not be dependent in any way upon the outcome of the elections in Zimbabwe?

Mr. Luce: The British Government have already made it plain that they are willing to consider any requests for aid that emanate from a newly formed Government. Obviously, it is too early as yet. Once a Government have been formed in March, and once they form a view that they would like to request aid from the United Kingdom, we shall

be very willing to consider that request. In the meantime there are some forms of temporary assistance that the British Government have already given.

Dame Judith Hart: While it is not surprising that that represents a change from the policy of the previous Government is the hon. Gentleman aware that it is a serious matter? Is the hon. Gentleman aware that it had been assumed that a certain amount of money would be available not from the aid budget but the contingency fund for the inevitable and necessary assistance with the economic development of an independent Zimbabwe? I am sure that the hon. Gentleman also knows that there was an effort to elicit the assistance of other countries in forming a Zimbabwe development fund. If he is not able to comment on these matters today, will he undertake to make, very soon, a full statement to the House on the whole issue?

Mr. Luce: As the right hon. Lady rightly suggests, there have been considerable changes in Rhodesia since the Government assumed office. I do not quite understand what it is that she is getting at when she talks about aid. As she well knows, we provide considerable sums for the education of Rhodesian students, principally in this country. When a newly formed Government emerge in March, we shall be ready to consider any form of assistance that they want. We have already been assured by the United States and by Western European countries that they will be ready to consider forms of assistance.

Hong Kong

Mr. Canavan: asked the Lord Privy Seal when he expects to meet the Governor of Hong Kong.

Mr. Ridley: My right hon. Friend has, at present, no plans to do so, but the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Blackpool, South (Mr. Blaker), met the Governor on Friday 11 January.

Mr. Canavan: Will the Minister instruct the Governor to repeal the Draconian public order law that makes it a criminal offence for three or more persons to hold a meeting in a public place? Is he aware that it is a law that may be used by the police to intimidate workers


and others who are threatened with eviction from their homes and work places, such as is the case of the villagers of Muk Min Ha in the New Territories? Is he not ashamed to have responsibility for a British colony where such fascist legislation still exists?

Mr. Ridley: We do not instruct the Governor, but the hon. Gentleman probably knows that extensive discussions have been taking place on the public order ordinance. The Hong Kong Government expect to introduce amendments to that ordinance in the near future to deal with the problem that he has mentioned.

Sir John Eden: Will my hon. Friend make clear to the Governor and the people of Hong Kong our appreciation of the way in which they are accommodating a substantial flow of immigrants into their country and giving sanctuary to a large number of refugees? In spite of the economic difficulties to which these factors give rise, the colony is still a most significant market for British goods in Asia.

Mr. Ridley: I am grateful to my right hon. Friend for saying what I think should be said about the extraordinary successes of Hong Kong economically and in terms of humanitarian assistance in dealing with refugees from all quarters. There are still 55,000 Vietnamese boat people in Hong Kong. I am sure that the House will appreciate that that is an enormous burden on the Administration of Hong Kong.

Mr. Rowlands: Is not the fact that there are still 55,000 boat people in Hong Kong a comment on the resettlement programmes which have been introduced, which are obviously failing in terms of speed and time scale to deal with the serious problem that has arisen?

Mr. Marlow: What about Merthyr?

Mr. Rowlands: The people of Merthyr volunteered to take refugees from Vietnam, as did many other communities.
What is the position with the large-scale illegal inflow of refugees or immigrants into Hong Kong from China? What was the result of the important discussions with the distinguished Chinese guests of a few months ago?

Mr. Ridley: I agree with the hon. Gentleman that it presents a major problem to have so many Vietnamese refugees in Hong Kong. About 10,000 of them are about to come to the United Kingdom. Others will go to other countries. The more that can be done to persuade other countries to accept more of these refugees for permanent settlement, the better. As for immigration from mainland China, the recent visit of Chairman Hua Kuo-feng has resulted in much improved border security arrangements. The flow has greatly reduced, to the great assistance of Hong Kong.

Rhodesia

Mr. Hooley: asked the Lord Privy Seal what reports he has received from the Governor of Southern Rhodesia about the activities of foreign troops or mercenaries in that territory.

Sir Ian Gilmour: There are persons of various nationalities serving with the Rhodesian forces, as there are with the Patrotic Front forces. The Government made clear during the constitutional conference that there would be no purge of the forces of either side during the interim period. The Governor has agreed that a small contingent of South African forces should be stationed at Beit bridge on the Rhodesian-South African border for the protection of the bridge.

Mr. Hooley: Now that the Government have quite shamelessly admitted to the presence of South African troops on Rhodesian territory, in flagrant contradiction of the explicit assurances given to the House that such troops would not be permitted there, does that not cast a shadow over the good faith of the Government in the implementation of the Lancaster House agreement?

Sir I. Gilmour: No, of course it does not. It is astonishing that the hon. Gentleman should get up and ask the same question that has been asked already by three hon. Members.

Mr. Russell Kerr: We still want an answer.

Sir I. Gilmour: Many other matters are of greater importance to the House, such as the breaches of the ceasefire and the detention of ZANU detainees by Mr. Mugabe in Mozambique. To concentrate on the matter referred to by the


hon. Gentleman and others seems to show a complete absence of any sense of proportion. As I have said already—I may as well say it again—I cannot accept that one small detachment of troops to guard the Beit bridge adds up to involvement by foreigners in Rhodesian affairs.

Mr. Speaker: Questions relating to EEC matters, No. 22.

Mr. Cormack: On a point of order, Mr. Speaker. I should like to register a protest about the short amount of time that has been given to questions dealing with foreign and Commonwealth affairs at a time of world crisis.

Oral Answers to Questions — EUROPEAN COMMUNITY

Community Institutions

Mr. Dykes: asked the Lord Privy Seal when he intends to raise the question of the relationship between the different Community institutions at the Council of Ministers.

Sir Ian Gilmour: The Government do not intend to propose changes in the present balance of powers between the institutions of the Community. However, the European Parliament's rejection of the 1980 draft budget is likely to lead to further discussion in the Council of its relations with the Parliament.

Mr. Dykes: After his recent tour, is my right hon. Friend more optimistic that both the longer-term reform of the budget and the elimination of our excess contribution—the short-term problem—can be achieved in a spirit of genuine compromise? That is the only way in which the Community can move forward. Does my right hon. Friend see a positive role for the European Parliament in the formulation of sensible ideas for reforming the budget structure?

Sir I. Gilmour: Plainly, the European Parliament has an important role to play. The direction in which it is seeking to alter the budget is a direction which will appeal to many hon. Members, if not to all. It also strikes a chord with public opinion. Exactly how the negotiations between the Council, the Commission and the Parliament will proceed, I cannot yet say. Presumably, the Commission will produce a paper some time next month.

Mr. Spearing: Will the Lord Privy Seal confirm that the present position is that the EEC can pay up only one-twelfth of last year's budget? Will he also confirm that, if the Council so wishes, it can authorise payments in excess of that amount under the Treaty of Rome? Will the right hon. Gentleman tell the House whether that matter was discussed at the Foreign Affairs Council that was held on Monday and yesterday? If so, what was the conclusion of such discussion?

Sir I. Gilmour: I confirm the position about the payment of one twelfth—it is as the hon. Gentleman says. There was no discussion on this matter on Monday and yesterday and, therefore, the position about the one-twelfth payment remains the same.

Mrs. Dunwoody: Is not the position that, if the European Parliament asks for a larger budget sum, differently divided, the Government will go along with that as part of their compromise?

Sir I. Gilmour: I cannot possibly speculate as to what will happen. I cannot say what will be our reaction to the European Parliament's proposals on the budget until we know what those proposals are. I stress to the hon. Lady that the first step is for the Commission to resubmit the budget. It is not, in the first instance, for the Parliament to produce its proposals.

Mr. Renton: Will my right hon. Friend go further than he did in his answer to my hon. Friend the Member for Harrow, East (Mr. Dykes) and say what changes he believes may be necessary in the relationships between Community institutions in view of the European Parliament's rejection of the Community budget? Should not such changes ensure that, in future years, the European Parliament does not have to take such a drastic step in order to have its views heeded?

Sir I. Gilmour: That is an extremely important and difficult matter. I am not convinced that any changes in the institutions are necessary. Plainly, some change in the working of the institutions may be necessary, but I trust that, in the future, there will be better relations between the Council and the Parliament. No doubt, more attention will be paid to the Parliament in future. As a result of


that, similar constitutional crises will not arise in the future.

Council of Foreign Ministers

Mr. Knox: asked the Lord Privy Seal when his noble Friend expects to meet his European Economic Community counterparts.

Sir Ian Gilmour: At the next Foreign Affairs Council in Brussels on 4 and 5 February.
I attended the Foreign Affairs Council yesterday at which we considered the measures which the Community should take as a result of events in Afghanistan, trade with Rhodesia, the appointment of an extra Advocate General to the Court of Justice, staff pay, and the Community's relations with ASEAN, Yugoslavia and Latin America. There was a brief procedural discussion of the United Kingdom budget problem. I am circulating a more detailed account in the Official Report.

Mr. Knox: Is my right hon. Friend satisfied that the Community can respond quickly enough to the serious and changing international situation? If not, will he put proposals before his colleagues at the next meeting of the Council to improve the machinery for developing Community foreign policy?

Sir I. Gilmour: It is in the nature of a community, a collection of States or an alliance, that it is able to work less quickly than an individual country. Obviously, there are difficulties in concerting measures in the Community. As my hon. Friend will be aware, important decisions were made yesterday concerning the cancellation of food aid to Afghanistan, the urgent consideration of the refugee problem in Iran, an agreement by the Community not to fill the gap left by the halting of United States' food exports to the Soviet Union and the temporary suspension of butter sales pending detailed examination of further measures. Further action will be contemplated next week. As I have said, I do not believe that we should be paying attention to constitutional changes at the moment.

Mr. Greville Janner: Did the right hon. Gentleman discuss with his colleagues the question of other measures to be taken as a result of the Afghanistan

invasion, in particular the possible cancellation or removal of the Olympic Games from Moscow?

Sir I. Gilmour: The Olympic Games were mentioned at the NATO discussion, which I did not attend. However, they were not referred to at the discussion yesterday, although they will be in the future. That was because of lack of time, as much as anything else. As the hon. and learned Gentleman knows, the Government have not yet formed a final view. The International Olympic Committee and the British Olympic Association are independent bodies.

Mr. Eldon Griffiths: Is my right hon. Friend aware that it is not entirely satisfactory that the decisions that were reached yesterday by the Community Ministers should be communicated to the House only by way of an accidental question on the Order Paper? There should be a proper statement on the matter which could then be the subject of questions. In the circumstances of Afghanistan, is my right hon. Friend satisfied that the members of the European Community are doing what is required and not merely talking about taking measures? Is he aware that, as an ardent European, I am disappointed by the reaction of our French and German friends-to date?

Sir I. Gilmour: The question of making a statement is always difficult. Sometimes the House complains of too many statements, while at other times it complains that there are not enough. I appreciate what my hon. Friend has said, but, as I said earlier, it is difficult for a community or an alliance to reach quick decisions. Only the first step has been taken, and I hope that more will be done in the future.

Mr. Shore: I should like to associate myself with the remarks made by the hon. Member for Bury St. Edmunds (Mr. Griffiths). I agree that there should have been a proper statement on the matter. As I understand it, the meetings that took place yesterday in Brussels, both at NATO and at the EEC, were of some importance. Perhaps the right hon. Gentleman attended the wrong Council meeting. He might have had more serious discussions at the NATO meeting than at the EEC discussions. We hear a great deal about political co-operation—

Mr. Speaker: Order. The right hon. Member really must ask a question.

Mr. Shore: Was there, at the EEC meeting, or during consultations with the Lord Privy Seal's right hon. and hon. Friends who attended the NATO meeting, any serious discussion of trade policy? If so, what was the response of our partners? Perhaps at the meeting which the right hon. Gentleman did not attend, but of which he will have heard, there was discussion of the Olympic Games.

Sir I. Gilmour: I believe that the Minisster of State, my hon. Friend the Member for Mid-Oxon (Mr. Hurd), said at the end of the meeting that no decision had been reached about the Olympic Games. I have already told the House what was decided about trade in agricultural products at the meeting that I attended.

Following is the information:
I represented the United Kingdom on 15 January at this first meeting of the Foreign Affairs Council under the Italian Presidency.
The Community has agreed that EEC supplies of food should not be allowed to take the place of those from the United States on the Soviet market, directly or indirectly. The Council has invited the Commission to take all appropriate measures to implement this decision, as regards cereals and products derived from them, and to propose further measures if necessary, for other agricultural products.
In addition, the Council decided to cancel the 1979 Community food aid programme to Afghanistan, and to consider as soon as possible a proposal which will shortly be produced by the Commission for emergency aid to Afghan refugees.
This represents a concrete and substantial economic response by the European Community to the situation which has been created, which complements the political positions also adopted yesterday by the Nine Foreign Ministers. It was agreed that work in the Community on this question should continue and that a further report would be made to the next Foreign Affairs Council on 5 February.
The statement on Afghanistan approved by Foreign Ministers recorded their grave concern at the Soviet Union's military intervention in Afghanistan which they viewed as a flagrant interference in the internal affairs of a third country and a threat to the peace of the region. They called on the Soviet Union to act in accordance with the resolution of the United Nations General Assembly and withdraw their troops from Afghanistan.

Agreement was reached in principle to an EEC trade regime for Rhodesia and, eventually, an independent Zimbabwe which will last up to the end of 1980. This regime provides for free access for industrial products and generous treatment for agricultural products—including duty-free access for tobacco. The Council's agreement is subject to the opinion of the European Parliament but that will, we hope, be forthcoming by the end of this week. I should like to record here the Government's appreciation of the contribution made by other member States and, in particular, the Commission towards securing so quickly full agreement on this important subject.
The Council agreed that details of the Community's improved offer for a new EEC-Yugoslavia co-operation agreement should be settled at tomorrow's meeting of the Committee of Permanent Representatives so that the Commission can continue negotiations with Yugoslavia next week in time for a final decision on the new agreement to be taken at the next Foreign Affairs Council on 4–5 February. We welcome this sense of urgency.
No agreement was reached on the appointment of an additional Advocate General to the European Court of Justice or on the annual staff pay review.
The Presidency made a statement drawing attention to the importance of developing relations with Latin America. There was no discussion.
Ministers agreed that the next ministerial meeting with ASEAN should take place when the co-operation agreement is signed. The first week of March will be proposed to ASEAN.
The Council took note of the resolutions passed by the Parliament at its session of 10–14 December 1979. There was no discussion.
The Foreign Affairs Council reviewed progress in other specialist councils. There was no substantive discussion.

Mr. Jessel: asked the Lord Privy Seal when he intends to meet his European Economic Community counterparts.

Mr. Leighton: asked the Lord Privy Seal when next he will meet his EEC colleagues.

Sir Ian Gilmour: I met them at the Foreign Affairs Council yesterday. I shall meet them again at the next Council on 4 and 5 of February in Brussels.

Mr. Jessel: Will my right hon. Friend please make a special effort to have further discussions about whether the Olympic Games should be held at a venue other than Moscow and will he see whether his European counterparts have the same views, even if that means postponing the Olympic Games? If those Games are postponed, surely any disappointment felt by a few thousand


athletes sould be seen as a minor matter compared with the possible effect upon Russian public opinion that withdrawal might have. It may help to prevent a third World War. Surely the Government are not entirely without influence, as they contribute to the cost through the Sports Council.

Sir I. Gilmour: At the Council meeting yesterday it was agreed that all possible measures relating to Afghanistan should be considered in Rome next week and therefore discussion of the Olympic Games will take place then. I appreciate my hon. Friend's point about the advantages of finding another place at which to hold the Games, but he will understand that many difficulties are involved because there is such short notice. Other countries, like Britain, do not control their Olympic committees.

Mr. Leighton: Will the Lord Privy Seal tell the House of any benefits that Britain derives from membership of the EEC?

Sir I. Gilmour: One benefit I hope will appeal to the hon. Gentleman is that the EEC strengthens the Western orientation of Britain. Given Soviet behaviour in Eastern Europe, that should appeal to all hon. Members.

Mr. Tapsell: Is my right hon. Friend aware of the widespread disappointment at the published reports of the meetings of the EEC yesterday? Will he give the House an absolute assurance that Her Majesty's Government will urgently examine, with all their allies, measures for decisive action against Russian influence in all parts of the world as an unmistakable demonstration of our refusal to march, again, along the path of the 1930s?

Sir I. Gilmour: I understand from newspaper reports, and from the House today, that there is some disappointment about our achievements. However, as I have said, alliances and communities can move only slowly. No doubt my hon. Friend is aware that my right hon. and noble Friend the Foreign Secretary is now touring the area adjacent to Afghanistan. He will return at the end of the week and we shall consult as to what further measures should be taken.

Mr. Jay: Is it true that yesterday the French even opposed the complete cancellation of sales of cheap butter by the EEC to the Soviet Union?

Sir I. Gilmour: It is not the custom to reveal the attitudes of individual Governments in Council meetings. There have been reports on that matter.

European Parliament

Mr. Dalyell: asked the Lord Privy Seal what is the cost of holding plenary sessions of the European Parliament in Strasbourg and Luxembourg, and committee meetings in Brussels; and what would be the saving if the Parliament were based in a single place.

Sir Ian Gilmour: According to a recent report of the European Parliament's Committee on Budgets, the cost of the three centres including rent and accessory items amounted to approximately 17·1 million European units of account—£11·39 million—or 20·3 per cent. of total expenditure in 1978. If the member States were to agree that the Parliament should be established in one place, savings would no doubt be possible. But no official estimates have been made.

Mr. Dalyell: While it was bad enough in the previously indirectly elected Parliament, is it not absurd that a European Parliament of 400 Members should be peripatetic and unnecessarily caravanning around Europe?

Sir I. Gilmour: With his European experience, the hon. Gentleman will know that this is a matter for the Parliament and the European Council. It can be changed only by unanimous vote in the Council.

Mr. Proctor: Does my right hon. Friend accept that there would be an even greater saving if there was no European Assembly?

Sir I. Gilmour: Of course, all parliaments cost money. However, no one would regard that as a reason for abolishing the European Parliament. I would have thought it was common ground that the European Parliament has already shown its great usefulness and that it is a great asset to the Community.

Legislation

Mr. Peter Mills: asked the Lord Privy Seal what steps he is taking to reduce the amount of EEC legislation.

Sir Ian Gilmour: The Government have made clear on a number of occasions that they are against unnecessary legislation and standardisation for its own sake.

Mr. Mills: Will my right hon. Friend bear in mind that we need a drastic reduction in legislation? Is he aware that the legislation is a particularly heavy burden on small businesses, it is costly and it is unnecessary? Does he appreciate that such a practice spoils the good legislation that can come out of Brussels? Will he make a special effort to ensure that a drastic reduction in legislation occurs? Perhaps my right hon. Friend will bear in mind the stupidity of the directive concerning harmonisation of bathing water.

Sir I. Gilmour: I do not remember that particular incident, but it seems a most cogent example.

Mr. Cryer: Does the Lord Privy Seal agree that some public scrutiny would help to curtail the mass of legislation from the EEC—most of which is trivial and absurd? Rather than keep the decisions of the Council of Ministers behind closed doors would it not be of help to open those doors to the public, so that they may know what is going on within an absurd Common Market?

Sir I. Gilmour: I am surprised that the hon. Gentleman is against excessive legislation, but if that is so within the context of Europe, that is a matter for him. It would not be helpful for Council meetings to be open to the public. As the hon. Gentleman will have noticed, a good deal leaks out, despite the so-called privacy. Apart from anything else, there is no space in the room. There is, therefore, a good technical reason for leaks.

Mr. Dykes: Does my right hon. Friend agree that there should be reductions in all forms of legislation, both nationally and within the Community? Will he remind the House that it is always constitutionally open to the Council of

Ministers to say "No" to the Commission if it wishes to on any proposal?

Sir I. Gilmour: I agree with both parts of that question.

Mrs. Dunwoody: Is the Lord Privy Seal aware that these EEC regulations have the force of law and that there is great disquiet in the House about the number of decisions that are taken without giving the House an opportunity to discuss them? Will he look at this question again and will he bring many more issues before the House as quickly as possible before decisions are taken, rather than afterwards?

Sir I. Gilmour: I was not aware of great discontent. I thought that we had been most scrupulous. I shall certainly look at the point.

Emergency Calls

Mr. Pavitt: asked the Lord Privy Seal what arrangements have been proposed or agreed to within the European Economic Community to harmonise statutory regulations for the recording of urgent calls for fire services, police, and ambulance services in accordance with the arrangements now in existence in France and Germany; and if he will make a statement.

The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): No arrangements have been agreed to within the Community and I am not aware of any proposals for the harmonisation of recording procedures for such telephone calls.

Mr. Pavitt: Is the Lord Privy Seal aware that Britain is sadly lagging behind in modern technology for very important emergency services? Is he aware that both France and Germany have improved on our efforts? Although that might not come within the province of Common Market harmonisation, will he make representations to the Home Office to bring us up to date?

Mr. Hurd: The hon. Gentleman has baffled us with his question. He seems to be making a case for harmonisation within the EEC, and perhaps there is such a case. I shall draw the attention


of the Secretary of State for the Home Department to the hon. Gentleman's remarks.

Official Visits

Mr. Spearing: asked the Lord Privy Seal when he expects to make a statement concerning his recent official visits to Governments of various member States of the EEC.

Sir Ian Gilmour: My round of visits is not complete. I have so far visited Rome, The Hague, Luxembourg and Brussels. I shall be visiting West Germany tomorrow and the remaining Community countries next week.
I have at present no plans to make a statement to the House. I can, however, say now that I am not discouraged by my discussions so far.

Mr. Spearing: Is the Lord Privy Seal aware that yesterday when he was at the EEC Council his right hon. Friend the Prime Minister, in answer to a question from me, changed her objective of £1,000 million to "vastly increased receipts"? Can he tell the House what that figure is?

Sir I. Gilmour: The hon. Gentleman's premise is wrong and I therefore cannot answer the question. After Dublin, my right hon. Friend the Prime Minister made it clear that it was the Government's policy to seek a genuine compromise with our partners and she added that we had little room for manoeuvre. At a time when the Government are pursuing negotiations, it is quite impossible to give figures or disclose our exact negotiating position.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Rural Developments

Mr. Stoddart: asked the Lord Privy Seal what projects for rural development

have been approved during the last five months.

The Minister for Overseas Development (Mr. Neil Marten): Two major rural development projects have been approved since July 1979. This brings to 10 the total of such projects initiated in the first nine months of the current financial year. I am arranging for these projects to be listed in the Official Report.

Mr. Stoddart: I thank the Minister for that information. Has he seen the report of the American Commission on World Hunger which predicts that within 20 years there will be acute starvation and malnutrition in the Third world unless measures are taken to step up food production in those countries? Will he redouble his efforts and the aid that he gives to rural agriculture in underdeveloped countries?

Mr. Marten: It would be difficult to double the amount of aid that we give on these rural projects. The share of bilateral aid committed to the poorest countries, where this is very much one of the main projects, has exceeded 60 per cent. in recent years. However, I agree that the emphasis should be placed in the way the hon. Gentleman suggests.

Mr. Eldon Griffiths: Since India is the principal recipient of British overseas aid, will my hon. Friend look for an early opportunity to have discussions with the new Government? Is he aware that there are a number of rural projects there where British aid could materially assist in improving food production?

Mr. Marten: Yes. I hope to do so in March, but already this year there are four projects going ahead for rural development in India.

Following is the information:

APPROVALS OF RURAL DEVELOPMENT PROJECTS IN 1979–80 FINANCAL YEAR


Date of approval

Country

Project title
£m.


5 April 1979
…
Nepal
…
 Khosi Hill area development programme (Khardep)
5·76


3 May 1979
…
India
…
Foot and mouth disease vaccine plant
7·3


17May 1979
…
Peru
…
Cajamaraca agricultural development project
1·22


14June 1979
…
Sudan
…
South Darfur savannah project
4·63


14June 1979
…
Sudan
…
Southern region agricultural project
9·24


21 June 1979
…
India
…
Kanpur fertiliser plant
7·7


12July 1979
…
India
…
Earthmoving equipment
17·0


26 July 1979
…
Jordan
…
IRBID rural electrification
3·5


6 September 1979
…
India
…
Orissa family welfare
10·84


7 November 1979
…
Tanzania
…
Rural water supplies
1·4



68·59

"Aid to the Poorest"

Dame Judith Hart: asked the Lord Privy Seal if he proposes to maintain the aid policies of Cmnd. 6270, "Aid to the Poorest" or if he proposes to produce a new White Paper.

Mr. Neil Marten: A review of the aid policy is well advanced and I hope to make a statement shortly.

Dame Judith Hart: Can the Minister be a shade more informative? Is he proposing to change the priorities of the White Paper, which were accepted by the Conservatives when in opposition? He must come clean a little more.

Mr. Marten: That is precisely what I propose to do. I intend to make a statement to the House.

Mr. John Townend: When reviewing the aid programme, will my hon. Friend recognise that anger has been caused to a large proportion of the population by the continuous attacks on Britain by Presidents Nyerere and Kaunda?

Mr. Marten: I recognise that but it is not a factor that one can take into account when considering a development programme.

Mr. Deakins: Why are we giving so much aid to Turkey, which is one of the richest of the developing countries?

Mr. Marten: Turkey is still very much a developing country, particularly in rural areas. It has had balance of payments problems and we have offered Turkey £15 million programme aid, which I think is quite right.

Population Programmes

Miss Boothroyd: asked the Lord Privy Seal if he is satisfied with the progress being made within the overseas development programme to ensure that population programmes are integrated into all overseas aid development projects; and whether he will make a statement.

Mr. Neil Marten: I am sure that more might be done, but not all aid-financed development projects can logically contain population programmes, and in any event such projects must obviously be designed in relation to the wishes and policies of the recipient Governments. I accept the argument that there may be a link between economic development and the constraint of the world population.

Miss Boothroyd: Is the Minister satisfied to see the largest British aid programme of £100 million which is devoted to the Mahewelli plan project in Sri Lanka remain an economic project without any social input? Does he recognise that land being allocated to families cannot sustain an increasing birth rate and that population growth is an obstacle to progress in many Third world countries? Will he give a firm commitment to integrate into this and other development projects administered by the British Government an element dealing with welfare and population activities?

Mr. Marten: I believe that in that case the aid is to go to the dam. The Mahewelli project is further down, outside the dam. This is a World Bank project and obviously the Bank integrates those matters.

Mr. McElhone: Does the Minister accept that one of the best ways of dealing with the problem is to improve the general economic well-being of the area as a first priority? If so, how does he justify the £115 million cutback in the aid programme for 1980–81? That is a 14 per cent. cutback and the most savage public expenditure cut by this Government.

Mr. Marten: I do not agree with those figures. They are wrong, but they were published in The Guardian. If the hon. Gentleman will table a specific question, I shall answer it.

Children

Mr. Welsh: asked the Lord Privy Seal what proposals he has with regard to aid directed towards children in developing countries.

Mr. Neil Marten: Children should benefit directly and indirectly from much of our aid expenditure. So far as concerns programmes specifically directed towards children, I intend to continue aid to education and child health, to support international organisations such as UNICEF and the organisations concerned with population questions and to contribute to suitable projects designed for children put forward by British voluntary organisations.

Mr. Welsh: I thank the Minister for his reply. Is he aware of the great disappointment both inside and outside the House about the way in which the Government's expenditure cuts affect aid to underdeveloped countries? Will he assure us that any further cuts will not interfere with the programmes for children in the Third world?

Mr. Marten: I can give no assurances because the aid framework is not finally agreed. The right hon. Member for Lanark (Dame Judith Hart), my predecessor, will, perhaps, explain to the hon. Gentleman exactly what that means. The programme will continue, but at a possibly slightly reduced level. We simply must understand that our duty is to get our economy right first. The latest report of the World Bank said that, unless countries such as Britain do that, it is the developing countries that will suffer.

Dame Judith Hart: Can the Minister give some assurance that at least another

side of the question is being put by himself and his colleagues in the Foreign Office? As he well knows, there is another side of the case, as I think the Brandt report will show when it is published. Is he aware that one of the solutions to our economic problems is the promotion of development in the Third world? Are the Minister and his colleagues in the Foreign Office pressing for minimum reductions in the aid programme and the earliest possible increases?

Mr. Marten: It is natural that we should do so.

London School of Hygiene and Tropical Medicine

Mr. John Grant: asked the Lord Privy Seal what funding is provided towards work at the London School of Hygiene and Tropical Medicine by the Overseas Development Administration.

Mr. Neil Marten: In the current financial year our commitment is of the order of £556,000.

Mr. Grant: Will the Minister accept that this is an internationally renowned centre which appears to be facing a serious financial crisis, primarily as a result of spending cuts by the Department of Education and Science? If overseas students from the poorer countries cannot go to this centre, that will represent a serious indirect reduction in our overseas aid effort. Because of that, will the Minister have urgent talks with the Secretary of State for Education and Science to see whether he can assist in satisfactorily resolving this problem?

Mr. Marten: I accept the importance of this institution. It is fair to say that the students who are placed there by the Overseas Development Administration will be fully funded at economic fee levels, and I cannot forecast the demand from other students. However, I am visiting the institution at the end of this month.

STANDING ORDER NO. 63

Mr. Speaker: I have a brief ruling to make. The House will recall that yesterday I replied to a point of order about the attendance of Law Officers at Standing Committees. The question was raised by the hon. Member for West


Stirlingshire (Mr. Canavan). I had no notice of the the substance of the point of order, of which I make no complaint. Therefore I ruled extemporarily and off-the-cuff.
In view of a misunderstanding that I believe has arisen. I make it clear that Standing Order No. 63, which I read to the House, confers a right upon Law Officers to attend meetings of Standing Committees but does not impose any duty upon them to do so, nor does it confer any right upon a Committee formally to summon them. Should any Member, during the course of proceedings in a Standing Committee, express the wish that a Law Officer should attend, it is for the Chairman to decide whether that is in order. He is subject to no guidance from me in this respect.

Mr. Canavan: On a point of order, Mr. Speaker. Will you confirm that it is in order for the Chairman of a Standing Committee to accept a motion that an invitation be extended to one or other of the Law Officers to attend the Committee? I am sure that you appreciate the difficulty that faced the Standing Committee on the Education (No. 2) Bill yesterday when, due to certain legal complexities, we wanted the attendance of the Solicitor-General for Scotland and possibly other Law Officers. The Solicitor-General for Scotland is a difficult man to get hold of. His attendance in this Chamber is rather irregular, to say the least—

Mr. Speaker: Order. I allowed the hon. Member to proceed, but I must emphasise that the Chairman of a Standing Committee is in charge of that Committee and there is no appeal from the Chairman to the occupant of this Chair, and certainly not to me. The Chairman of the Committee decides what is in order and what is not.

Later—

Mr. Harry Ewing: I wish to raise a point of order on your original statement, Mr. Speaker. I thank you for the clarification. Does not the ruling that you gave yesterday and the explanation that you have just given highlight the difficulties facing Standing Committees of the House when the Secretary of State from one Department makes a ruling that affects a Committee that is being sponsored by a different Department?

In this case the Department of Education and Science was affected by a ruling given by the Secretary of State for the Environment. The Secretary of State for the Environment gave a legal ruling in terms of section 97(4) of the Local Government Act 1972, and it was that legal difficulty that caused all the problems for the Committee yesterday. May I ask the Leader of the House, through you, Mr. Speaker, whether the appropriate Committee of the House might look at the whole matter?

Mr. Speaker: The remarks of the hon. Member will have been heard by those who have more influence than I have on such matters.

Mr. David Watkins: Further to the point of order, Mr. Speaker. I speak as the hon. Member who has the privilege of chairing Standing Committee D. As a result of the ruling that you gave yesterday there was some confusion in the Committee. I appreciate that the ruling was given by you at very short notice. It resulted in an effort to table a motion by hon. Members in good faith which I, as Chairman, ruled out of order at equally short notice. I am most grateful for the clarification this afternoon, which shows that Standing Order No. 63 is quite specific. I based my ruling on that Standing Order. I am sure that all members of the Chairmen's Panel will be grateful to you, Mr. Speaker, for having clarified the position in relation to that Standing Order for the conduct of future Committees.

FOREIGN AND COMMONWEALTH AFFAIRS QUESTIONS

Mr. Lawrence: On a point of order, Mr. Speaker. I wish to raise again the point made previously by my hon. Friend the Member for Stafford shire, South-West (Mr. Cormack) about the allocation of time for general Foreign Office questions. It seems to be the impression of all hon. Members that it is preposterous to have only half an hour every four weeks for these questions. Will you, Mr. Speaker, advise the House about the status of the present time arrangements and how they might be changed?

Mr. Speaker: First of all, it is not half an hour; it is 25 minutes. For five minutes we seek heavenly wisdom from above, and our prayers are not always


answered. Those who manage the affairs of the House—the usual channels—must be approached if hon. Members feel strongly about this matter, and it appears that they do.

Later—

Mr. Robert Hughes: On a point of order about Question Time, Mr. Speaker. One appreciates that there are difficulties in dealing with specific issues at Question Time. However, will you take into account the fact that on the question of Rhodesia, as the Lord Privy Seal said himself, there are many areas that need to be discussed? Is it possible for you, Mr. Speaker, bearing in mind that this House is responsible for events taking place in Rhodesia, to prevail on the Government to make a regular weekly statement on progress in that country? There are serious issues at stake and to rely on chance private notice questions does this House no credit.

Mr. Speaker: This again is a matter for the usual channels, and hon. Members should pursue it in the normal way through their party machinery. This afternoon I allowed nearly 10 minutes on Question 1, which was a considerable share of the 25 minutes, because I knew that the matter was of considerable interest.

Mr. Norman Atkinson: Further to the point of order, Mr. Speaker. It is true that there are private ways in which hon. Members can raise matters about the time allocated. However, surely there are other occasions when a more open approach should be made, as on this occasion. My Question 4was put on the Order Paper as a result of all-party discussions with various engineering organisations, and some hon. Members who wanted to supplement the questioning on this matter did not do so because they wanted to question the Lord Privy Seal about Helsinki. That raises the question of those hon. Members who do not voluntarily pursue points that we have commonly discussed.
Secondly, is it not the case that the embarrassment suffered today by the Lord Privy Seal arose because he is the Lord Privy Seal and not the Foreign Secretary? The Foreign Secretary, being in another place—

Mr. Speaker: Order. With respect, that is not a matter for me. On the earlier point, the House has expressed its opinion and no doubt it has been noted by those responsible.

Mr. Ioan Evans: On a point of order, Mr. Speaker. I hesitate to pursue this matter, but the issue of Question Time has been raised on a number of occasions. Today during Foreign Office questions we had to deal with international affairs, European matters and overseas development. Will the Leader of the House undertake to look again at this problem and make some recommendations?

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): Further to that point of order, Mr. Speaker. I am well aware of the difficulties. As hon. Members know, I have done my best to try to accommodate the wishes of all hon. Members. The great difficulty is that if there are to be more questions for one subject it means less time for other subjects, and no one is willing to give up any time to a subject other than his or her own. Certainly, in response to what has happened today I shall look at the matter again and discuss it with the right hon. Member for Stepney and Poplar (Mr. Shore). Certainly I shall seek help from above and, if necessary, help from below as well.

Mr. Speaker: Order. Amend, I hope that we can now leave that matter with the assurance of the Leader of the House that he intends to look at it further. There is nothing to be gained by pressing it further this afternoon. I believe that the House is anxious to move on to the statement that is to follow. A large number of hon. Members also wish to speak on the rate support grant later.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: If hon. Members feel that they have something to say that is of the utmost significance and will help the House, I shall call them.

Mr. English: I should like simply to suggest that since—

Hon. Members: No.

Mr. Speaker: Order. If we were open to suggestions, we would be here all day. The hon. Gentleman is an experienced


Member of the House. If he has a substantial point of order, on which I am required to give a ruling, perhaps he will now make it or for ever hold his peace.

Mr. English: I was hoping, through you, Mr. Speaker, to suggest to the Leader of the House that, like questions about the regions of England, Scottish and Welsh questions could be referred to a Committee.

Mr. Speaker: Order. I am sorry that I gave way to the hon. Gentleman.

GAS AND ELECTRICITY INDUSTRIES

The Secretary of State for Energy (Mr. David Howell): With permission, Mr. Speaker, I should like to make a statement about financial targets for the British Gas Corporation and the electricity supply industry in England and Wales.
It is a fundamental objective of this Government's policy towards the nationalised industries that they should be set a clear financial discipline. We therefore opened discussions with the gas and electricity industries on medium-term financial targets for the period 1980–81 and 1982–83. The external financial limits for 1980–81 announced last November were set in the light of these discussions, which have now been satisfactorily concluded.
In a period of international uncertainty over fuel supplies and rapidly rising fuel costs, it is important that consumers should be aware of the true value of the fuel they are using. The prices which consumers pay for different fuels must reflect that value, taking into account, in particular, the fact that oil and gas supplies are limited. We must conserve our scarce energy supplies for future generations. After a year in which crude oil prices have risen by 100 per cent. or more, this is bound to mean heavy increases in other fuel prices. The need to move to economic pricing has been our main consideration in setting the financial targets for the two industries.
I recognise that adjusting to an era of higher energy prices brings serious problems for many consumers, especially the old and the poor. The new scheme of assistance with heating costs announced by my right hon. Friend the Secretary of State for Social Services on 22 October was designed to provide worthwhile help for those in most need. We shall take proper account of the cost of energy in our social policies and in determining benefit levels, particularly the levels of extra heating additions. We are reviewing, in this context, the whole range of help available to assist consumers with fuel bills.
I should first like to deal specifically with gas. There are five reasons why domestic gas prices will have to rise.
First, our reserves of natural gas represent a finite and increasingly valuable national resource. If the price is too low, we shall burn it up too fast and bring forward the day when we have to turn to more expensive sources of supply.
Secondly, in the short term, too, low prices cause peak demand to surge above what it would otherwise be, bringing the risk of shortages and supply cuts on cold winter days.
Thirdly, gas from new North Sea fields will cost several times more than earlier gas supplies and prices must reflect these much higher costs.
Fourthly, a sensible approach to pricing is vital if we are to achieve a proper balance of supply and demand, as between all consumers of gas. For industrial and commercial customers, it has been the longstanding policy of the British Gas Corporation to sell gas at a price broadly related to that of the competing oil product. The Government endorse this policy. The only alternative would be some form of arbitrary rationing and the risk of ever-increasing supply shortages.
Fifthly, artificially low prices concentrate the benefits on those who have access to gas supplies at the expense of the rest of the population. Correct pricing is essential if some of the financial proceeds from our natural gas resources are to be secured for the benefit of the nation as a whole. Hon. Members will recall that even the Price Commission, in its report last July, before recent oil price increases, concluded that domestic tariffs should be 30 per cent. to 35 per cent. higher in real terms.
Against this background, and the background of soaring world oil prices, we have set the British Gas Corporation a target, expressed as an average annual rate of return to be achieved over the period April 1980 to March 1983, of 9 per cent. on net assets valued at current cost. The target is related to current cost operating profit after taking account of depreciation but before interest and tax. It will be adjusted, if necessary, after introduction of the proposed new current cost accounting standard. The target rate of return is expressed as an average over three years. The actual rate of return is likely to be

lower than 9 per cent. at first, but will increase progressively over the period.
Details of the tariff changes necessary to achieve the target are a matter for British Gas. However, in broad terms, the Government expect domestic gas prices to increase this year by 10 per cent. over and above the rate of inflation, followed by comparable real increases in the following two years.
Against the same criteria of economic pricing, electricity prices will also rise, though the expectation is that this will be less than in the case of domestic gas.
The target for the electricity supply industry in England and Wales has been set at an average annual rate of return of 1·8 per cent., on net assets valued at current cost, again over the three years 1980 to 1983. As in the case of gas, details of tariff changes are a matter for the industry. Prices are likely to increase over the three-year period of the target by about 5 per cent. over and above increases in the industry's own costs of which fuel costs are the biggest element.
The Government have asked both the British Gas Corporation and the Electricity Council to phase this year's increases in two stages, one in April and another in October.

Dr. Owen: Against a background of spiralling domestic inflation, is the right hon. Gentleman aware that these are astronomical increases? There is not a family in the country that will not be severely affected. Is he aware that fuel, light and power represent 6 per cent. of an average family income and over 10 per cent. of the income of those people whose earnings are 20 per cent. or more below the average? This is a severe blow. Do not these increases demonstrate the appalling economic meanness of the abolition of the electricity discount scheme?
Is the right hon. Gentleman prepared to accept a rebate scheme for fuel applicable to everyone, whether using gas, electricity, coal or paraffin? Until the right hon. Gentleman and the Government come forward with a generous scheme for helping with fuel bills, we cannot possibly accept the logic of increasing prices to this extent.
Will the right hon. Gentleman explain exactly what he means when he refers to the rate of inflation in this coming year?


What rate of inflation is he estimating for the year 1980? Will he also come clean and explain what his statement means in terms of gas bills between April of this year and April next year? What will be the percentage increase on gas bills? What will be the percentage increase on electricity bills from April to April that every family will have to find?
Will the right hon. Gentleman give an assurance that he will not introduce some modification of the scheme announced by his right hon. Friend the Secretary of state for Social Services, which helped only 350,000 people as opposed to the 3·5 million helped by the electricity discount scheme, which meant a saving from £45 million to £14 million? Will he give an assurance that he will use these revenues for a generous scheme for helping the poor and those with high fuel bills?

Mr. Howell: I am certainly aware of the impact on all our price levels of higher energy costs. We all regret that, but we must face the fact that there has been a 100 per cent. increase in world crude oil prices in the past year. This necessarily means a major adjustment for all of us.
The right hon. Gentleman talked about the needs of the poor and the old. Those needs are fully recognised in Government social policy.
The right hon. Gentleman also talked about the electricity discount scheme, but that scheme was only for electricity consumers. I think that it is generally recognised that it was an idiotic scheme, because it spread benefit very widely, often over those who did not need it. I very much prefer the scheme developed by my right hon. Friend and announced in October, which provides a basis for support, in a time of high energy costs, over a far wider area of all consumers. It will meet the needs far more effectively than the electricity discount scheme, which was generally recognised as a bad scheme and a silly one. [Hon. Members: "Why?"] Because it concentrated only on electricity.
That is our approach. We are determined to develop our social policies effectively in an era of high energy costs. That is the obvious way forward.
As to inflation rates in 1980, we shall have to see what the outturn of inflation is. I cannot predict it. The prices will

have to be based on the inflation outturn when it comes along.
As to the increases on average bills over the year, bills vary widely for different families, but the broad effect over the year will be an increase in family gas and electricity bills of rather less than the total inflation, plus the 10 per cent., because the second 10 per cent. will not come until October. The precise figures will vary from family to family.

Mr. Skeet: Is my right hon. Friend aware that the real price of gas between 1970 and October 1979 fell by one-third? Is he aware that consumers in the United Kingdom are somewhat better off, in that VAT is not charged on gas but in Europe it is, at between5 per cent. and 20 per cent.? Will my right hon. Friend bear in mind that he has no power under the Gas Act 1972 to claw back to the Crown the excess profits made by the industry?

Mr. Howell: My hon. Friend is right, in that even after the increases Britain is likely to have the lowest domestic gas and electricity tariffs in Europe.
As to the powers concerning the large surplus which will obviously be generated as we move to economic pricing, my hon. Friend is right. The existing powers allow only for the surplus to be returned to the Exchequer and the Treasury to help reduce, amongst other things, the public sector borrowing requirement. That is the limit of the powers.

Mr. J. Enoch Powell: Why should we conserve resources for future generations when we cannot know what the circumstances of those future generations will be?

Mr. Howell: I think that the right hon. Gentleman and I agree that the motive force for conservation must be the price decisions and the price signals as they operate in the face of the consumer. Nevertheless, there is another consideration which is not economic. It is a strategic consideration. It is a patriotic one, if the right hon. Gentleman likes to put it in that way. It is that in a dangerous world, when our sources of supply of oil and gas, liquid gas or gas in frozen form, are politically unstable areas, it makes strategic sense for this nation to postpone as long as possible the day when we shall again be dependent


on politically dangerous and politically influenced sources of supply. That is not economics; it is strategy. I believe it to be good strategy for this nation.

Mr. Emery: Will my right hon. Friend tell the House whether in his moving away from the policy of long run marginal costs, which has been adopted by Governments of both parties in the past, the AA/RR of 9 per cent. which he is now setting is considerably higher than that which has been obtained by the long run marginal costs? If that is so, in the state of inflation that exists would it not make greater sense to spread the increase in prices of 27 per cent. in the next 12 months over a much longer period?

Mr. Howell: It is not the policy to move away from the principle of long run marginal costs. One of the realities that must be faced is that the British Gas Corporation is now having to look further a field for new gas supplies. It can no longer rely on the very cheap Southern Basin contracts, which were running at about 2p per therm. That was for the old gas. But the old gas will not go on for ever. The corporation is already having to pay 14p per therm—seven times as much—for gas from the Frigg field, and it will certainly be asked still higher figures for further gas from the North Sea. Therefore, to replace the very cheap gas that the nation has enjoyed will require a vast increase in resources and revenues. That alone is one reason why prices which have been depressed—the issue was ducked for too long under the previous Government—must now be raised.

Mr. Arthur Lewis: The right hon. Gentleman will be aware that even now, without the increases, I have had quite a correspondence with him about the fact that the aged, the sick, the infirm and those on social welfare benefits who are already having difficulty in paying fuel bills find that the gas and electricity boards are with speed and, it seems, enthusiasm cutting off their supplies. Can the right hon. Gentleman give an assurance that he will have a word with the Department of Health and Social Security and the boards to see that before such people are cut off the boards consult that Department, to ensure that those con-

cerned are not blind and bedridden people who cannot get out of bed to collect the letters of notification or to answer the door, and who find that they are being cut off, so that they have no heat, no light, no gas, no nothing? The Minister has done nothing about it.

Mr. Howell: The hon. Gentleman is right to say that the matter is a cause of serious worry. He is wrong to say that we have done nothing about it. First, there is the code of conduct which the nationalised industries are obliged to follow. There have been complaints about that code and the way in which it is used. For that reason, we are reviewing the whole way in which that code is being applied. I say "we", but in fact an independent review is being carried out. I believe that that will help in this matter.
The hon. Gentleman also highlights the difficulties, which I do not shirk, over paying higher fuel bills that the energy costs impose on us for outside reasons and that come into our national economy. Perhaps I may give the hon. Gentleman an example. An average quarterly domestic bill is now about £29. Next year it will be £7 more. About £4 of that rise is due to the effects of inflation, and the remaining £3 is due to a real increase in the price of gas. Therefore, average bills will be about 50p a week higher next year, of which less than half will be due to a real increase in gas prices. I tell the hon. Gentleman that, and I should also have said it to the right hon. Member for Plymouth, Devonport (Dr. Owen), who rightly asked me that question.

Mr. Penhaligon: In the light of the 9 per cent. return on capital, just how is the value of gas in the North Sea arrived at? Who sets the value? Is it ourselves, OPEC or market forces?

Mr. Howell: It is market forces. We import from Norway about 20 per cent. of our gas. There is competition for gas supplies from the North Sea, and there will be increasingly strong competition in future years. Therefore, the market price of gas is influenced by market forces. The price of gas from the Frigg field, a median field between Norway and Britain, from which a third of our gas comes, is related by a fixed formula to the price of oil. Therefore, every time the price of oil goes up worldwide the


price of gas going into our pipes, our stoves and our heaters goes up as well.

Sir Bernard Braine: Is my right hon. Friend aware that whilst everyone would agree that some increase in energy prices is necessary, in the light of the circumstances that he has described, many people in this country are mystified? They see the gas industry making substantial profits. My own constituents know that it is difficult enough to meet electricity and gas bills now. Can my right hon. Friend explain the justification for the size of the increase in gas prices? That is what people want to know.

Mr. Howell: I shall do my best to meet the points made by my right hon. Friend. He speaks of the British Gas Corporation's substantial profits or surplus. It is certainly true that as we move towards economic pricing—which the Government believe to be vital—that surplus will increase. While the BGC may have a large surplus and is efficient, it does not mean that it is competing for customers. On the contrary, customers are competing for gas, as industry well knows. That will continue until the price rises to economic levels. Failure to go that way will be grossly inefficient and will lead to arbitrary rationing and shortages. I believe that though people may dislike price increases as I do, the danger, without price increases, is that there will be no gas at all. Then people really will freeze.

Mr. Benn: Is the right hon. Gentleman aware that his arguments will not carry a great deal of weight because everyone knows that there are many ways of conserving gas supplies without imposing a savage tax upon the poorest consumers, who will be driven to disconnection and poverty? Is he aware that this will increase industrial costs for those firms that depend on fuel and that it will lead to further difficulties in exporting and maintaining employment at home? Is he further aware that in the long run what Britain needs is a powerful manufacturing industry upon which it can rely when the oil runs out? What are the Government doing about that?

Mr. Howell: I try to listen to, and sometimes learn from, the right hon. Gentleman, my predecessor in this post,

but the idea that holding down gas prices is the best way to help the poorest people is surely a silly proposition. Such a policy helps the rich and poor alike. There are much more efficient ways—upon which the Government are bent—of helping those who are in need, particularly as they face hardship caused by high energy prices.
Whatever the present price of energy, which is related to oil, industry is clamouring for more gas. That indicates that, whatever the price of gas, industry prefers to move from oil to gas. The policy of the British Gas Corporation—endorsed by the Government—is to relate industrial gas prices to the competing oil products' price. That is our policy and is, I think, the current policy of every Western industrial country, with the possible exception of the United States which is moving in that direction.

Mr. Forman: Is my right hon. Friend aware that the move towards economic pricing of gas will be strongly welcomed on energy conservation grounds by many of his right hon. and hon. Friends? Is he further aware that there may be a case for examining again the possibility of an additional gas tax in order to recoup some of the extra revenue for the Treasury which might then be made available for the poorer gas consumers?

Mr. Howell: I am grateful for my hon. Friend's point about conservation. It is a vital consideration. A gas tax is certainly an interesting idea. The present surplus generated by the British Gas Corporation—which in some ways could be described as a rent because of the cheap gas coming from the Southern Basin—goes to help the Exchequer and thus is to the general benefit of the community. It also helps, among other things, to reduce the public sector borrowing requirement.

Mr. S. C. Silkin: Will the right hon. Gentleman tell the House where in legislation is the authority for the sort of considerations that he has just mentioned as a justification for increasing the price of gas to the extent that he has said will be necessary? Has he taken the best legal advice as to the vires of what is being done?

Mr. Howell: I do not believe that the right hon. and learned Gentleman heard what I said. I said that a gas tax was an


interesting idea. There is no gas tax and no authority for such a tax. The present practice is for the British Gas Corporation to contribute its surpluses to the national loans fund. They then count against the PSBR. That is present practice, for which there is recognised authority. The right hon. and learned Gentleman is right to say that we would need new legislation for the introduction of a gas tax.

Mr. Gordon Wilson: Does the Minister realise that the measures that he has announced will have a great effect on those areas of Scotland and the North where the climate is more severe? Does he realise that elderly people may die of hypothermia because of his moves? Since there will be an increased surplus available from the British Gas Corpoartion, will he make that money available to expand the fuel discount system so that those in greatest need will benefit? As part of his energy policy, will the right hon. Gentleman try to get some work done on insulation so that all consumers may heat their homes adequately without consuming so much energy?

Mr. Howell: I have said that we shall develop our social policies in the light of the impact of the high cost energy era which is now with us and which will not go away. That era is a reality and we must have the courage to face it. The hon. Gentleman has a good point about insulation. The Government are now encouraging an extensive programme of domestic insulation. It is more extensive than the programme that we inherited, because we have expanded it to cover public authority housing. Recently we announced new guidelines for local authorities which will enable more pensioners and other elderly people to benefit from schemes for home insulation. We recognise the importance of insulation and we shall continue to do so.

Mr. McCrindle: As a result of my right hon. Friend's announcement, may we expect a further policy statement on the social considerations of increased gas and electricity prices? Will the Secretary of State confirm that any such further announcement will be made in the very near future to enable any additional assistance that is felt to be necessary to be fed into the budget arithmetic?

Mr. Howell: We are talking about prices that will have their impact next winter. That is some time ahead. However, I shall draw the attention of the Chancellor of the Exchequer to the remarks of my hon. Friend. I have said that we intend to develop our social policy—the Chancellor has effectively said the same—in order to take account of national conditions in an era of high cost energy. We recognise those factors.

Mr. Hardy: Is there not an element of brutality in the right hon. Gentleman's excessive reliance on pricing in pursuit of energy conservation? Is it not clear as a result of his recognition—belated though it may be—that our oil and gas reserves are finite, that his comments can be dismissed as humbug since he has supervised the flaring of gas to the tune, over the past six months, of 551 million cu ft a day? That is far more than has been consumed on any day in the past six months by the whole of the Yorkshire and Humberside region.

Mr. Howell: We have imposed severe flaring restrictions, as the hon. Gentleman knows. I cannot see his justification for making that point.
It seems to me that the worst humbug would be to proclaim, in the cause of helping those genuinely in need, a general reluctance to allow the price of gas to rise to economic levels, thus causing major waste and shortage. Such a policy would possibly bring a small benefit to a vast number of people, but in the long run it would neglect the poorest and the most vulnerable. That is the real humbug.

Mr. Bruce-Gardyne: Is there not a faint aroma of hypocrisy rising from the Opposition in view of the way in which they supported the right hon. Member for Bristol, South-East (Mr. Benn) in his aspirations to achieve a gas price which would insulate the National Union of Mineworkers from the consequences of its own wage bargaining? Will my right hon. Friend consider whether it is time to look again at the exclusive access of the British Gas Corporation to supplies of gas from the North Sea? Is there not a case for opening the door to private enterprise to compete with the British Gas Corporation for those supplies at perhaps a more remunerative price?

Mr. Howell: I note my hon. Friend's second point. It is an interesting suggestion, and the Government are reviewing the whole structure of the nationalised industries to make them more competitive. I have no doubt that such suggestions will be taken into account.
As to coal prices, I should make it clear to my hon. Friend that the price of electricity is primarily dragged up by coal and oil prices, whereas the need for the price of gas to rise is primarily to do with economic pricing and the need for conservation. It so happens that in my statement there is mention of an improvement in the balance between gas and electricity. It would be wrong, however, to assume that there is a cause and effect between electricity and gas prices at the centre of our policy. There is not, nor is there meant to be.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: I propose to call four hon. Members from each side, which will give a fair run.

Mr. McWilliam: Is the Minister aware that coal gas can be used when supplies run out? Is he suggesting that the nation's coalfields are politically sensitive? Will the Minister prevail upon the Chancellor of the Exchequer to recognise that, because of the increase of 27½ per cent. in the price of gas, old people will die next winter unless they receive a higher pension or a subsidy for gas? Does the Minister agree that if he does not understand the difference between a primary source of energy, such as coal, oil or gas, and a secondary source of energy, such as electricity, he needs to do a little more homework?

Mr. Howell: I am not sure that I understood the depth of the tail end of the hon. Member's question. The hardship caused by rising prices will be met by the automatic uprating of benefits. I have said that our social policies will be developed effectively in an era of high cost energy. The hon. Member mentioned coal gas. In due course it will be necessary, if we maintain a national gas transmission system when our North Sea natural gas has been burnt up, to turn to coal gas. Major research and experiments are being conducted. Undoubtedly that will be expensive and it will mean that once again the price of

gas is related to the price of coal, which is within the nation's influence. One of the encouraging factors is the high productivity at many of the coalfaces. We have the basis in the nation—and this is common ground—for building out of the old coal industry a new and profitable enterprise for the future.

Mr. John H. Osborn: To what extent will the new increases in gas prices make flaring uneconomic and therefore make it worth while to use the wasted gas reserves? What estimate has been made of the increased prices increasing the viability of developing otherwise uneconomic or marginal gas fields?

Mr. Howell: The prices involved are to the customer. My hon. Friend is talking about prices to the producer, which are not changed by what I have said today. Flared gas is an associated gas—largely wet gas, a curious term. Until there is a gas-gathering pipeline in the North Sea, which I hope that we can achieve, there are limits to the amount of gas that can be recovered. When it is recovered, it is used mainly for butane, propane and other bases for the petrochemical industry. What I have said today does not change that. My statement will not directly affect the development of the marginal fields. The British Gas Corporation is now having to pay higher prices for new supplies of gas, and that is bound to have an impact on calculations about whether it is worth spending money on exploring and developing new gas fields.

Mr. Soley: Does the Secretary of State accept that the increase in gas prices is disastrous for low-income groups? Will he consider announcing an expanded fuel discount scheme at the same time as price increases for gas and electricity are announced? Does he accept that price rises and discount schemes should go hand in hand and that people should not have to wait in fear and suspicion until a scheme is announced to help people at risk?

Mr. Howell: The development of a social policy of the most effective kind should go hand in hand with the impact of price rises. However, it is necessary to announce the financial targets, as I have today, so that the industries involved can plan their finances for next year. Our social policy must be developed in


that way. I emphatically reject the philosophy behind the electricity discount scheme, which seems to spread the margarine too thinly and involves only small sums of money. I admit that large numbers of people benefit, but my right hon. Friend's scheme produces benefits up to 10 times greater—£50 per person—for those who are in genuine need. I am sure that that is right.

Mr. Burden: Did the British Gas Corporation ask for the increased gas prices which the Minister has announced today?

Mr. Howell: No. The Government set targets higher than those which the British Gas Corporation wanted. I am happy to make that clear. We did that because we have to ensure that our natural gas assets are not burnt up dangerously fast as oil prices soar and everybody rushes to buy gas.
The Government have a responsibility which goes wider than that of the British Gas Corporation. It is true that the British Gas Corporation will have to pay much more for its new gas and will, therefore, need higher revenues. The Government set higher targets than the corporation wanted because of the needs of the national energy policy and because we do not want our resource to be burnt up so dangerously fast that we are confronted again much too early with the need to import from dangerously unstable political areas.

Dr. Owen: Dr. Owen rose—

Mr. Speaker: I intend to call the right hon. Member for Plymouth, Devonport (Dr. Owen) when I have exhausted the number of hon. Members that I said I would call.

Mr. Spriggs: Is the Minister aware that his statement will be interpreted by the industries which produce electricity and gas to mean that he is encouraging a commercial price for gas? The poorest people especially will be rationed by price.

Mr. Howell: The nation as a whole will have to be rationed by price. Within that we shall devise social policies to help those who are hardest hit. The aim of the hon. Member for St. Helens (Mr. Spriggs) is to help those who are most vulnerable. The worst way to do that is to hold down prices. That helps poor

and rich alike and that cannot be compassionate or sensible.

Mr. Proctor: Is my right hon. Friend aware that the British Gas Corporation indicated to the National Gas Consumers Council that the increases cannot be justified on commercial grounds? I am a fan of market pricing, but I should like a comment on that. May we have an assurance that the profits created by the price increases will not be used to subsidise other more inefficient nationalised industries?

Mr. Howell: As my hon. Friend is a fan of market pricing, he will be glad to know that we are moving towards market pricing. Of course, that will lead to a large surplus because old gas was cheap; new gas will be much more expensive. It is rubbish to say that the surpluses will be used to subsidise loss-making industries, which is what my hon. Friend suggested in a broadcast yesterday. The surpluses help to reduce the public sector borrowing requirement—an aim to which I thought my hon. Friend was dedicated.

Mr. James Lamond: What did the gas and electricity consumer councils say when they were informed about the increases?

Mr. Howell: The views of the consumer councils have not yet been conveyed to me in detail. The natural reaction of all consumers when confronted with higher prices is not to like them. None of us likes higher prices. However, we shall all have to pay more for petrol, gas and other fuels. That is the reality.

Mr. Eggar: I welcome the broad aims of my right hon. Friend's statement, but why has he chosen to raise gas prices by relating them to the increase in the real rate of return required by the BGC? Why has he not decided to price gas in relation to the price of home heating oil and to phase in such price increases? Why has he not considered introducing a gas tax to recoup the economic rent that will accrue to BGC? Does he agree that part of such a tax could be used to reduce the bills for the poorest consumers?

Mr. Howell: I answered the gas tax point earlier. Our policy, however, means that the price of gas is being related to the price of the marginal fuel—heating oil—and the real rate of return


is the return required to achieve that. That figure is 9 per cent. which, regrettably, is high by today's standards, although 10 years ago a great deal of British industry would have regarded a net rate of return of 9 per cent. on revalued assets as being perfectly attainable. It is a reasonable rate for a highly efficient industry.

Mr. Robert C. Brown: Is the Secretary of State aware that his statement is like the flared-off gas to which he referred—wet? It was certainly short of any significant energy conservation measures, and it certainly lacked equity. It is scandalous that the right hon. Gentleman should be compelling a highly efficient nationalised industry to increase its prices to a level that it is not seeking. Is he aware that, in spite of all that he said about the sick, the unemployed and the pensioners—on which I agree with him entirely—the 30 per cent. increase is nothing short of a punitive tax which will hit particularly the lower paid?

Mr. Howell: The hon. Gentleman's points about social policy and hardship are well taken. I recognise them fully. On the question of the present surplus and profitability of the BGC, the plain fact is that the corporation is not competing for customers. On the contrary, customers are clamouring for more gas. It would be a very serious matter if British industry were to be deprived of the supply of gas that it needs and our entire energy policy were to be distorted. That is a most important consideration because that is the source of the wealth needed to pay for the social policies upon which the hon. Gentleman and his right hon. and hon. Friends are always so ready to spend money.

Dr. Owen: What price increase did the chairman of the British Gas Corporation consider to be commercially justified? What is the expected increase in profitability of the BGC over the next financial year resulting from the extra amount that the Government have imposed on the price list?

Mr. Howell: The estimate on the latter point would be £200 million to £300 million extra. On the first point, the British Gas Corporation did not express a view in precise terms but took the

view that, while it agreed with the aim and objective of moving to economic pricing, for the present year, it would have wanted a somewhat lower figure, but it did not give me a precise figure,

Mr. Cryer: On a point of order, Mr. Speaker. During the course of the Secretary of State's statement, members of the Press Gallery were busily turning over copies of the statement. It is a perennial cause of concern that, with certain limited exceptions, hon. Members are not provided with copies of statements. This practice has continued for years, but there is no reason why it could not be changed. I inquired at the Vote Office, but the statement was not available when the Secretary of State had sat down. If hon. Members had copies, it would give them the opportunity to put more informed questions. It would be a useful innovation for hon. Members to have copies.
Will you, Mr. Speaker, therefore, use your powers, which I understand may be limited, in this matter? I understand that motions to alter the procedures of this place are a matter for the Leader of the House, who is a member of the Cabinet and has not the slightest wish to alter a situation that benefits the Government by preventing the sort of detailed probing and questioning which hon. Members have the right to engage in. I ask you, therefore, Mr. Speaker, whether we can make a slight alteration to our procedures to improve them.

Mr. Speaker: I do not comment on the merits of the hon. Gentleman's point of order, but he will know that it is not within my discretion to require copies of statements to be made available to hon. Members. I do not wish to enter into any argument on this. The hon. Gentleman has made his point, and I am sure that it has been heard by those responsible.

Mr. Arthur Lewis: Further to the point of order, Mr. Speaker. I accept that you cannot and will not intervene between Government and Opposition, but I believe that you have a duty to assist hon. Members to carry out their work, a task that you exercise very well with regard to the Library, assistants and so on. If you were to indicate your support for what my hon. Friend the Member for


Keighley (Mr. Cryer) has suggested—I do not suggest that you should say anything on the Floor of the House—that would be most helpful. If the Leader of the House knew that that was your view and that you wanted to improve facilities for hon. Members, he would be more likely to respond favourably.

Mr. Speaker: I have listened with respect to the hon. Gentleman, who has served in the House for 35 years. He will not expect me to comment further, but I am much obliged for what he has said.

Mr. Maxton: On a point of order, Mr. Speaker. Since the Secretary of State's statement covered the electricity supply industry for England and Wales, can you give an assurance that there will be a similar statement in respect of the electricity supply industry in Scotland? Will it be done by a press statement, or will Scotland be exempt from the increase?

Mr. Speaker: I share the hon. Gentleman's ignorance on that matter.

YUGOSLAVIA

Mr. Cormack: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the urgent need for an international guarantee of the future independence and territorial integrity of Yugoslavia.
I know that it has been indicated that we are shortly to have a foreign affairs debate centring on Afghanistan, but in the wake of the invasion of that country by Soviet forces hon. Members throughout the House are concerned about another and a European country. That concern has been demonstrated in an early-day motion that I tabled last night and that has already attracted about 150 signatures.
It is quite obvious that the President of Yugoslavia is a sick man. If the latest reports are to be believed, he is gravely ill. Naturally, we all wish him well and hope that he will recover and be able to lead his people for some years to come.

But above sympathy and good wishes, President Tito and his people need a guarantee of their future independence as a nation and of their territorial integrity, and they need that guarantee from the international community.
In a case such as this, someone must take the lead. Yesterday in this House my right hon. Friend the Prime Minister showed that she was willing to take an initiative, through NATO. I hope that you, Mr. Speaker, will allow the House an opportunity to show its united resolve. Too often in matters of grave international consequence we react, we do not anticipate. Here is a chance for us to anticipate and perhaps prevent what could be a global disaster.

Mr. Speaker: The hon. Member for Stafford shire, South-West (Mr. Cormack) gave me notice before 12 o'clock today that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believed should have urgent consideration, namely,
the urgent need for an international guarantee of the future independence and territorial integrity of Yugoslavia.
I listened with deep concern to the hon. Gentleman, and I in no way seek to detract from the seriousness of his statement to the House. I am aware that he has raised a most important matter, but the House knows that under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision.
After listening carefully to the hon. Gentleman—and I am in no way saying that this matter ought not to be debated—I have to rule that his submission does not fall within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 1 FEBRUARY

Members successful in the ballot were:

Mr. Hugh Fraser.

Mr. John Hannam.

Mr. Terence Higgins.

DOGS (CONTROL)

Mr. Andrew F. Bennett: I beg to move,
That leave be given to bring in a Bill to make provision for the further control of dogs; and for connected purposes.
Britain is supposed to be a nation of animal lovers—particularly, a nation of dog lovers. The facts do not really bear that out. The facts suggest that we have allowed sentiment for dogs to cover up for the lack of a sensible policy towards them.
Each year between 180,000 and 200,000 stray dogs are rounded up, mostly by the police. Over 60,000 dogs have to be destroyed every year—a task that the Royal Society for the Prevention of Cruelty to Animals finds particularly distasteful. In fact, about 150 dogs per day are being destroyed in this country. If Saatchi & Saatchi had lined them up and put them into one of the advertisements that we saw of queues earlier in the year, I am sure that most people would be demanding that something be done about it. It seems to me to be a scandal that that number of dogs have to be destroyed every day.
It is not only a problem of the dogs which are straying and which are rounded up; there are many more dogs which stray but which no one actually manages to catch, and they cause a great deal of nuisance.
Each six months, more than 2,000 dog owners are prosecuted because their dogs have bitten people. We all know of many more instances of stray dogs biting people and no prosecution following.
Many hundreds of dogs each year are shot as a result of farmers trying to stop them worrying their sheep. Nearly 6,000 farm animals are killed every year by stray dogs worrying them. Anyone who has witnessed sheep-worrying or animal-worrying knows the great anguish that the animals suffer and the great heart-break to farmers who have worked hard to build up flocks over the years and who then find half of their animals being chased round and round the fields by a pack of stray dogs. This causes great distress.
Each year, more than 2,000 road accidents result from dogs being on the high-

ways. Let us consider the misery for the dog that is caught in traffic on a busy motorway. One hon. Member pointed out to me this morning that when he was coming to the House four dogs were running round in the middle of Parliament Square. How on earth could they have got there without passing through traffic? One has only to imagine the problems that face drivers when dogs run across the road in front of them. Their instant reaction is to try to miss the dog, not taking into account other road users.
I could go on to list many other problems, particularly the problem of stray dogs searching their way through dustbins and turning them upside down in order to get sufficient food. There is the problem that one finds on pavements as a result of dog dirt, and the difficulties on playing fields.
There is also the question of the farce of the present licensing system. [Interruption] If my hon. Friend the Member for Newham, North-West (Mr. Lewis) is not happy about dealing with dogs on the grounds that I have set forth so far, I am sure that he will take up the question of licensing. At present, the licence fee brings in about £1 million, yet it costs £1·6 million to collect. That is farcical. Also, about 50 per cent. of dog owners who should have licences do not bother to get them.
There is also the whole question of health problems associated with dogs which carry worms and transmit them, and often cause human illnesses.
The case for introducing sensible laws to control dogs is overwhelming. It is notable that since I have had notice on the Order Paper of my proposed Bill, I have had a lot of correspondence from groups such as the RSPCA and other animal welfare organisations pressing the case for something to be done about this matter.
In 1974 the then Government set up a working party. It spent two years looking at the problem and then produced a very modest set of proposals. Unfortunately, so far no Government have got around to implementing the working party's recommendations.
I was very pleased to see that a Minister at the Northern Ireland Office had announced last week that legislation on


this matter would be introduced for Northern Ireland. I accept that there is a slight security problem in Northern Ireland, in that one cannot encourage farmers to go around with guns to stop sheep-worrying. Apart from that, I cannot see any reason why what is suitable for Northern Ireland concerning the control of dogs ought not to be suitable for the rest of the United Kingdom. If the Government are to introduce legislation in respect of Northern Ireland, they ought to be doing so here, too.
I understand that the Government's excuse is that this matter can be dealt with by regulation in Northern Ireland but that it needs parliamentary time for a Bill here. If they were to support the Bill that I hope to introduce, they could deal with the matter very simply for the whole of the United Kingdom at one time.
Such a Bill ought to provide for the implementation of the recommendations of the joint working party, which was particularly concerned to establish a dog warden service—not merely to round up stray dogs but to give guidance to those who look after dogs and to try to prevent some of the nuisances that occur, and particularly to reduce the number of dogs that suffer as a result of neglect and lack of concern on the part of their owners.
This service ought to be paid for out of a much more realistic licence fee. It also ought to be a requirement that dogs ought to be licensed as soon as they change home and ownership, and not after a period of six months, and that a dog ought to carry an indication that it is licensed. It has been shown to be very simple to clip a coloured tag under the collar, the colour changing from year to year as the licence is renewed.
It should also be a requirement—it is included in many byelaws in various parts of the country—that any dog going on a highway ought to be on a lead. I notice that in the proposals in respect of Northern Ireland any dog that is going on to fields in which there are livestock ought to be on a lead.
There are also a few other minor recommendations of the working party which I hope will be implemented.
It is high time that we forgot about our sentiments and made sure that we had a concerned and sensible policy before the risk of rabies crossing the Channel, which might well panic us into taking measures that would be very harmful to dogs.

Mr. Arthur Lewis: I had not intended to oppose this application until I heard the presentation. Every word spoken by my hon. Friend the Member for Stockport, North (Mr. Bennett) may well be true, but, like every other do-gooder, he should remember that there is another side of the picture.
First, already the law says that dogs should be licensed. However, as my hon. Friend says, there are thousands of owners who refuse to pay the licence fee. What, therefore, does my hon. Friend suggest? Does he suggest that we introduce another licence fee, which they would refuse to pay?
My hon. Friend then suggests that we should control dogs and see that they do not go on the streets. How should we do that? Should we tell the owners who do not pay their licence fee? We could probably send letters to the dogs, asking each dog to read, please, "You must not go out on to the street without your licence".
My hon. Friend went on to say that we should appoint wardens. I wonder whether he has read the newspapers recently. People cannot be obtained to act as traffic wardens on the roads because there is not enough money to pay them. My hon. Friend says "Put a licence fee on the dog, and that will pay for the wardens'. Would it? There is a £50 duty on motor vehicles, but we cannot get enough money out of that to persuade people to act as traffic wardens.
Then my hon. Friend suggests putting different coloured tags on the dogs. These are the dogs that are running around spare, which the owners do not want. We are supposed to put coloured tags on them.
We do the same with cars. Of course, many drivers do not display the coloured road tax discs, and we cannot get enough traffic wardens to police the system. It is quite farcical.
My hon. Friend suggests that we should now do the same for dogs. I suggest that we should endeavour to make the present


system work. The suggestion is that because it does not work we should introduce even more silly laws.
What about cats? Almost every problem mentioned by my hon. Friend regarding dogs applies also to cats—except that they do not bite so much. But cats run across roads, cats go out all night, cats turn up dustbins, and so on. This is a ludicrous proposal. The whole system would break down. It cannot and would not work.
I ask my hon. Friend to think what would happen if this proposal were to be enacted. Old-age pensioners who own and really care for their little dogs and

who pay the licence fee would have to pay more. Those who do not pay the fee and allow their dogs to stray would still get away with it. Those who are abiding by the law and paying the licence fee will be caught and those who are getting away with not paying the licence fee will do so again if this measure is brought in. I strongly oppose it.

Question put, pursuant to Standing Order No. 13 (Motion for leave to bring in Bills and Nomination of Select Committees at Commencement of Public Business):—

The House divided: Ayes 154, Noes, 20.

Division No. 137]
AYES
[4.41 pm


Alexander, Richard
Fry, Peter
Newens, Stanley


Alton, David
Garel-Jones, Tristan
Oakes, Rt Hon Gordon


Ashton, Joe
Garrett, John (Norwich S)
O'Neill, Martin


Aspinwall, Jack
Glyn, Dr Alan
Orme, Rt Hon Stanley


Atkinson, Norman (H'gey, Tott'ham)
Gower, Sir Raymond
Park, George


Barnett, Guy (Greenwich)
Graham, Ted
Pavitt, Laurie


Beith, A. J.
Grant, George (Morpeth)
Penhaligon, David


Benn, Rt Hon Anthony Wedgwood
Grimond, Rt Hon J.
Pollock, Alexander


Boothroyd, Miss Betty
Hamilton, W. W. (Central Fife)
Powell, Rt Hon J. Enoch (S Down)


Bottomley, Rt Hon Arthur (M'brough)
Hardy, Peter
Powell, Raymond (Ogmore)


Braine, Sir Bernard
Harrison, Rt Hon Walter
Price, Christopher (Lewisham West)


Bright, Graham
Hattersley, Rt Hon Roy
Price, David (Eastleigh)


Brinton, Tim
Haynes, Frank
Race, Reg


Brown, Hugh D. (Provan)
Hogg, Norman (E Dunbartonshire)
Richardson, Jo


Brown, Robert C. (Newcastle W)
Holland, Stuart (L'beth, Vauxhall)
Roberts, Allan (Bootle)


Budgen, Nick
Home Robertson, John
Roberts, Ernest (Hackney North)


Burden, F. A.
Hughes, Robert (Aberdeen North)
Roberts, Gwilym (Cannock)


Cadbury, Jocelyn
Hughes, Roy (Newport)
Robertson, George


Callaghan, Jim (Middleton &amp; P)
Janner, Hon Greville
Rooker, J.W.


Campbell-Savours, Dale
Johnson, James (Hull West)
Ross, Ernest (Dundee West)


Canavan, Dennis
Kaufman, Rt Hon Gerald
Ross, Stephen (Isle of Wight)


Carmichael, Neil
Kerr, Russell
Ross, Wm. (Londonderry)


Cohen, Stanley
Kinnock, Neil
St. John-Stevas, Rt Hon Norman


Cook, Robin F.
Knight, Mrs Jill
Scott, Nicholas


Costain, A. P.
Lambie, David
Sever, John


Cowans, Harry
Lamborn, Harry
Sheerman, Barry


Crowther, J. S.
Lamond, James
Silkin, Rt Hon John (Deptford)


Cryer, Bob
Lewis, Ron (Carlisle)
Spearing, Nigel


Cunningham, Dr John (Whitehaven)
Litherland, Robert
Speller, Tony


Dalyell, Tam
Lofthouse, Geoffrey
Spriggs, Leslie


Davis, Terry (B'rm'ham, Stechford)
Lyell, Nicholas
Stallard, A. W.


Dean, Joseph (Leeds West)
McCusker, H.
Stanbrook, Ivor


Dickens, Geoffrey
McDonald, Dr Oonagh
Steel, Rt Hon David


Dixon, Donald
McElhone, Frank
Stewart, Rt Hon Donald (W Isles)


Dobson, Frank
McKay, Allen (Penistone)
Taylor, Mrs Ann (Bolton West)


Dormand, Jack
MacKay, John (Argyll)
Thompson, Donald


Dover, Denshore
McKelvey, William
Thorne, Neil (Ilford South)


Dubs, Alfred
McNally, Thomas
Thorne, Stan (Preston South)


Dunwoody, Mrs Gwyneth
McQuarrie, Albert
Varley, Rt Hon Eric G.


Eadie, Alex
Marks, Kenneth
Wainwright, Edwin (Dearne Valley)


Eastham, Ken
Marlow, Tony
Walker, Bill (Perth &amp; E Perthshire)


Edwards, Robert (Wolv SE)
Marshall, Dr Edmund (Goole)
Waller, Gary


Ellis, Raymond (NE Derbyshire)
Martin, Michael (Gl'gow, Springb'rn)
Ward, John


Ellis, Tom (Wrexham)
Maxton, John
Wheeler, John


Evans, loan (Aberdare)
Maynard, Miss Joan
Whitehead, Phillip


Evans, John (Newton)
Mikardo, Ian
Wickenden, Keith


Flannery, Martin
Molyneaux, James
Willey, Rt Hon Frederick


Fletcher, Ted (Darlington)
Morris, Rt Hon Charles (Openshaw)
Wilson, Gordon (Dundee East)


Forrester, John
Morton, George



Foster, Derek
Moyle, Rt Hon Roland
TELLERS FOR THE AYES:


Fraser, John (Lambeth, Norwood)
Mulley, Rt Hon Frederick
Mr. Andrew F. Bennett and


Fraser, Peter (South Angus)
Myles, David
Mr. Clive Soley


Freud, Clement
Needham, Richard





NOES


Bevan, David Gilroy 
Clocks, Rt Hon Michael (Bristol S)
Farr, john


Brotherton, Michael
Elllott, Sir William 
Foot, Rt Hon Michael


Clark, Dr David (South Shields)
English Michael 
Fraser, Rt Hon H. (Stafford &amp; St)




Jones, Barry (East Flint)
Rhodes James, Robert
Young, David (Bolton East)


Le Marchant, Spencer
Sandelson, Neville



Lewis, Kenneth (Rutland)
Smith, Dudley (War. and Leam'ton)
TELLERS FOR THE NOES:


Montgomery, Fergus
Waddington, David
Mr. Arthur Lewis and


Morrison, Hon Charles (Devizes)
Wigley, Dafydd
Mr. W. R. Rees-Davies.

Question accordingly agreed to.

Bill ordered to be brought in by Mr. Andrew F. Bennett, Mr. John Sever, Mr. Tony Marlow, Mr. Clive Soley, Mr. Bob Cryer and Mr. Tom McNally.

DOGS (CONTROL)

Mr. Andrew F. Bennett accordingly presented a Bill to make provision for the further control of dogs; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 15 February and to be printed. [Bill 115.]

RATE SUPPORT GRANT

The Secretary of State for the Environment (Mr. Michael Heseltine): I beg to move,
That the Rate Support Grant Order 1979, a copy of which was laid before this House on 28th November, be approved.
I understand that with this we may discuss the two additional motions relating to rate support grant orders for England and Wales, namely, the Rate Support Grant (Increase) Order 1979 and the Rate Support Grant (Increase) (No. 2) Order 1979.
The rate support grant settlement is central to the Government's economic strategy. The House will know that these orders represent our main means of influencing local authorities' rating and spending decisions. They come at a critical time: local authorities now account for over one-quarter of all public expenditure, and this debate must be seen in the context of the reduction of public expenditure that is a central imperative of the present economic situation.
Since the war there has been a striking growth in local government's share of domestic expenditure. In 1956, local government direct spending in the United Kingdom was 7½ per cent. of all domestic expenditure. By 1978 it was 10½ per cent., although the previous Government had reduced that proportion from the high point of 13 per cent. which it reached in 1975.
In the absence of economic growth, I have no choice but to ask local authorities to continue the relative downward trend to which the previous Government subjected them. But if the relative trends have been downwards the absolute trends have not. However, within the absolute increases, that spending has been on consumption and not on capital projects. In 1956 about one-third was capital investment. In 1978, capital spending was less than one-fifth. Local government direct current spending in real terms more than doubled between 1956 and 1978, whereas its direct capital investment was only about one-third higher.
Nothing better illustrates the nature of our problem than the manpower figures. In 1956 local authorities in Great Britain

employed 1·6 million people, including part-timers. By 1979 the figure was an astonishing 2·9 million, with almost continuous growth year by year except for 1974, when 90,000 employees were transferred with water and health functions.
So local government has mirrored the fundamental weakness of our economy—higher levels of public consumption of our resources with an increasing drift for those resources to go into current consumption at the expense of capital, and the whole programme rising at the expense of the wealth-creating sectors of the economy.
The growth of local government cannot be explained wholly by reference to new duties. Since 1945, local government has lost health, gas and water services. It has taken on consumer protection, and it has developed services such as education, housing, transport and personal social services. But this does not explain all the growth in expenditure and employment, which has followed consistent patterns of expansion over 30 years.
The problems of managing the public sector and controlling its internal capacity for generating its own growth are well known. The pressures of contemporary society only indirectly confront those who demand local services, with the bills that arrive as a consequence of their demands. The basis of local government finance actually encourages expenditure.
I believe that the first task is for each authority to establish exactly what each of its employees is engaged in doing. The second is to find out whether each of those tasks is necessary. The next is to control the recruitment to each authority under direct political control so that every time someone leaves or retires—and 125,000 people leave local government a year—there is no automatic assumption that his vacancy is filled.
Whilst, at large, local government is very close to the record number of people it has ever employed, it has been shown in authority after authority that profound effects can be achieved on numbers employed, and thus on rate levels, by administering tight control on recruitment.
The Government are playing their part by reducing the number of circulars they issue setting out detailed tasks for each authority and are also reviewing with


local government the accumulated range of statutory duties they have imposed on it. But the downward trends cannot wait for any consequent legislation. In today's circumstances we cannot afford, and we have no choice but to reduce, local government expenditure and employment.
Some reductions could come through more efficiency. If any hon. Member on the Opposition Benches doubts the urgency of what I say, I need only remind him of the words of the former Chancellor of the Exchequer at a meeting of the Parliamentary Labour Party in February 1976, where he set out the common problem to which I have been referring. He said:
The steady contraction in our manufacturing industry is the main reason for our disappointing performance since the war. The contraction must be reversed and halted. But we cannot reverse the trend if we plan to take more resources into the public sector.
That was the former Chancellor of the Exchequer speaking to the PLP in February 1976, as reported in The Times the following day.
Against that background, this rate support grant settlement is crucial. It must be realistic in the level of expenditure it envisages, in the total of grant and its distribution, and in the provision that is made for inflation within the cash limit.
Last year my predecessor's proposals were manifestly unrealistic. He provided for increases in expenditure that we could not afford. Based on growth assumptions that did not materialise, he distributed grant without taking account of the needs of the rural areas, and he provided a cash limit based on assumptions of 5 per cent. increases in pay and 8½ per cent. increases in prices. I believe that the settlement I have announced provides a rational basis on which authorities can plan. It is based on a logical extension of our economic policies to date.
Immediately on taking office, I asked local authorities to freeze recruitment and to review their manpower. As a first step to getting expenditure back to the 1977–78 level, I asked them to spend 1½ per cent. less in the current year 1979–80 than they had spent in the previous year. I asked them also for a further 1 per cent. reduction in 1980–81.
The previous Government's expenditure plans—plans which the former Chief Secretary has already admitted were unachievable because the underlying growth in the economy was not there—were obviously an impossible basis on which to calculate.
In our present plans we have asked for a phased reduction of 2½ per cent. over two years. The possibility of achieving this 2½ per cent. reduction is best illustrated if the House remembers that the last Labour Government achieved this in half the time in 1976 without, to my knowledge, any redundancies arising as a consequence. With careful planning and the co-operation of local government, cuts of this level should not have any serious effect on services.
That is the background to the orders that we are debating today. I shall deal first with the increase orders, which relate to 1978–9 and 1979–80.
The first increase order, the Rate Support Grant (Increase) Order, tidies up the 1978–79 settlement, covering additional grant payable in respect of pay and price changes between November 1978 and March 1979. It provides for £31 million for rate support grant and £0·8 million for transport supplementary grant to be paid, reflecting the revised cash limits.
For 1979–80, as I have said, a cash limit was based on the 5per cent. pay policy. We were thus left with a totally unrealistic situation. Our reaction, as my right hon. and learned Friend the Chancellor of the Exchequer said in his Budget Statement, was that we were prepared to take account of wage settlements incalculating the increase orders but would make an across-the-board reduction to reflect what the country could afford.
We have taken a view on how much it is reasonable for the taxpayer to contribute and the need for improvements in efficiency and productivity identified in the Clegg report, and we have therefore made a reduction of £310 million. This means cash limits adjusted for pay settlements and the variable items standing at £493 million for rate support grant, £30 million for transport supplementary grant and £0·4 million for national parks supplementary grant. The second increase order, the Rate Support Grant (Increase) (No. 2) Order, provides for this grant to be paid.
We must contribute towards additional costs in 1979–80 which have arisen since the settlement and which may still arise. These include elements of the comparability awards for teachers, craftsmen and the administrative, professional, technical and clerical grades. In the interests of certainty for authorities, and prudent financial management, we announced in November a firm cash limit on the additional contribution which may be paid through the second 1979–80 increase order in November 1980. The figures we have set are £148 million for rate support grant and £2 million for transport supplementary grant There will be no further increase in national parks supplementary grant.
The main order is for 1980–81, the Rate Support Grant Order 1979. I am proposing a level of relevant expenditure of £15,737 million at November 1979 prices. This accords with our expenditure plans and the need for local authorities to reduce their expenditure to the 1977–78 level. The grant percentage is maintained at 61 per cent., as last year. This means that the Government are making an equitable contribution towards local authority expenditure.
The domestic element of rate support grant will be kept at 18½p in the pound for England and 36p in the pound for Wales. The division into needs and resources element will be kept at the ratio of 67½ per cent. to 32½ per cent.
The aggregate Exchequer grant will therefore be £9,600 million. After deduction of specific grants estimated at £1,250 million, transport supplementary grant at £350 million and national parks supplementary grant at £4·5 million, this leaves the sum of £7,996 million for distribution as rate support grant.
The cash limit for the 1980–81 increase orders will be an envelope figure which covers additional grant payable in respect of pay and price changes between now and March 1981. The limit on rate support grant will be £1,380 million, on transport supplementary grant £46 million and on national parks supplementary grant £0·7 million.
This cash limit is compatible with year-on-year new pay and price changes of 13 per cent. It includes in addition a carry-through of an allowance to cover the effects of outstanding com-

parability awards which will be paid in 1980–81.
The House will know that, in addition to those figures, there are interest rate variable items, for which provision is made outside the cash limit.
Beyond what I have said, I have made clear to local authorities that the cash limit must hold and the Government will provide no more cash.
Local authority employers and the trade unions will need to negotiate to ensure that authorities can live within this cash limit, for excessive settlements will result in reductions in employment, in services, or in further burdens on the ratepayers. It is as simple as that. The impact on services and manpower of wage settlements will be the responsibility of those who negotiate and conclude them.
I have looked hard at the grant distribution arrangements. These have proved in recent years neither equitable nor sensible. Only a handful of people in my Department and in local government understand how they work. This is wrong, for the distribution of this massive sum—£8 billion this year—affects every local authority and ratepayer.
Grant entitlements have changed inexplicably from year to year, and rates go up in some areas but not in others. We need a better idea of what the grant system is trying to achieve and how it works. I shall outline what I think is wrong with the present machinery and how we shall improve it.
The objective of the distribution arrangements currently is simple and precise—to enable every local authority, if it so chooses, to provide a comparable standard of service for a similar rate in the pound. To achieve this, the system is designed to compensate authorities for unavoidable differences in what they need to spend on services and for differences in the rateable resources from which they have to raise the revenue.
The taxpayers' support is divided into various subdivisions, two of which seek to equalise the needs of each authority and the resources of each authority. Currently, the needs element is intended to compensate for differences in authorities' expenditure needs. The resources element is intended to compensate for differences in rateable resources.
This equalisation should leave all authorities with the same amount of expenditure per head of population—if they spend at the level of their assessed needs—to be met from the same rateable base. This objective is, in my view, correct and I have no plans to change it. It is the means which I believe to be wrong.
This year, clearly, we have not had time to legislate for changes and I have had to operate within the present arrangements. I have had two aims: first, to halt the unjustified drift of needs element from the shire counties which has taken place every year in the last six; second, to inject badly needed stability into the grant distribution after the upheavals, each and every year, under the previous Government.
We have achieved that objective. For the first time since 1974, the movement of grant from the shires has stopped and their overall share of the grant total has increased. They benefit by a real-terms increase in grant equivalent to the product of a 0·8p rate.
My settlement therefore benefits the shire counties, but the metropolitan authorities also increase their share in contrast to the decline that they saw in the last two years' settlements. The metropolitan authorities benefit by a real-terms increase in grant equivalent to a 0·7p rate, and their share of the total also will increase.
We achieved this by applying a standstill to the distribution and thus avoiding the uncertainties and inconsistencies of previous years.
One cause of many of the changes in distribution in recent years has been the use of the technique of multiple regression analysis to assess authorities' expenditure needs. This involves finding out which social and economic factors appear to match the pattern of what local authorities actually spent. It is in its essence a highly sophisticated system of probabilities in which factors are fed into a computer until it appears that the right balance of factors has been struck to reflect what was actually spent in aggregate by local authorities. In combination, the selected and weighted factors make up a general needs assessment formula, which can then be applied to

each authority to produce its assessment of needs.
This exercise has been carried out afresh each year, using updated expenditure data. As the starting point is the assumption that, overall, expenditure is equal to need, it is not surprising that this has led to a steady flow of grant towards high-spending urban areas.
This year we have used exactly the same needs element formulae as last year. The creeping tendency of multiple regression analysis to reward high spenders with more, and lower spenders with less, has been halted as a consequence. We have, however, taken commonsense account of new and updated statistics on some factors where these are available—for example, population changes and numbers of schoolchildren. This has meant some minor changes.
I have provided for a safety net limiting authorities' needs element losses in real terms compared with 1979–80 to the equivalent of a 1p rate—the most generous safety net ever. However, so stable is the distribution that only four authorities outside London have needed protection.
For London, however, I was faced with a particular problem. The updating of last year's figures, especially labour costs, meant a loss of about £80 million. I decided that this was too high a burden for London ratepayers. I have reduced this effectively, by using the claw back mechanism, to £18.5 million—again, a 1p rate.

Mr. Kenneth Marks: The right hon. Gentleman has referred to regression analysis. He contends that big spenders receive additional needs element grant because they have been high spenders. Will he give us an example? He knows that the AMA does not agree with him. Is it not a fact that larger authorities do better than smaller authorities?

Mr. Heseltine: I do not think that I need to give a specific example. If we base our assumptions on the fundamental principle that expenditure equals need, it must follow that the higher the expenditure, the greater the assumed need. The assumptions are guaranteed to deliver the consequences that I have been analysing, although I must refute the assumption that authorities that spend a great deal


have greater needs than authorities that spend, in their judgment, less.
I shall continue with my remarks about London. I have made an adjustment to protect London from the logic of the figures that were chosen last year. However, even this loss should be seen against an increased share for London from 1974–75 to 1979–80 in the needs element of 26 per cent. London gained by 26 per cent., but over the same period the metropolitan authorities' share increased by only 6 per cent. and the shire counties' share declined by 10 per cent.
Within London, there have been only minimal changes in distribution, and my decisions have followed as closely as possible the recommendations of the Greater London Council and the London Boroughs Association. A separate safety net limits grant losses to individual boroughs within London to the equivalent of a 3p rate. The arrangements for distributing needs element to non-metropolitan districts are virtually the same as last year. This distribution is patently and outstandingly equitable by any standards, and particularly by the standards set in recent years, but where do we go from the present situation?
I intend to change the present grant machinery. It is, in my view, defective in two key respects. First, grant is distributed on an assessment methodology which assumes that actual expenditure equals need. I know that the analysis is more sophisticated than this, but in the end it rests upon that fundamental assumption. High spenders can receive more and more grant and low spenders receive less and less. There is no incentive to economy. The pressure is all the other way—namely, to increase expenditure.
The second defect is in the operation of the resources element. This operates by giving authorities grant on the basis of their deficiency in rateable value below a national standard multiplied by the rate in the pound that they actually set. In other words, the more an authority spends—and thus the higher its rates—the more grant it attracts. There are two results. First, the Government have an open-ended commitment to underwrite an authority's expenditure, no matter how extravagant its expenditure pattern might be. Secondly, within the

grant available, a minority of high spending authorities, by levying high rates, can pre-empt for themselves an increasing share of the total, at the expense of the majority of more prudent authorities.
It is too little understood that the taxpayers' contribution to the finance of local government is finite. I have announced today the finite figures that will be contributed by the taxpayer in the foreseeable circumstances. I have announced this year's figures and I have limited the extra sums available to meet changes in pay and prices. Therefore, there can be no further call on the central Government. The only thing that is now at issue is which authority gets what proportion of a fixed finite pool. I cannot stand back—I do not believe hon. Members would want to stand back—and expect the majority of local councils, including Labour councils, to cut back in the climate of public expenditure retrenchment in which we now find ourselves if in so doing the only consequence of their economy is that other more profligate councils simply get more.
The majority of authorities are responsible and will respond to the Government's expenditure policies. They have done so, whatever their political complexion, by tradition. I have a responsibility to those authorities that comply with the Government's policy. I should protect them from the irresponsible minority to which they actually lose grant under the current arrangements. A grant system which rewards profligacy and penalises thrift is ludicrous.

Mr. David Alton: I agree with what the right hon. Gentleman is saying, but does he not accept that the nature of the rate support grant settlement that he is outlining will have precisely the same effect—namely, that authorities that have been thrifty will be penalised and those that have been profligate will have room in which to cut back because they will be fat within their expenditure within their budgets? The authorities that have been thrifty will have great difficulty in meeting their targets. They will end up sacking a great deal of staff. They will have to sack far more than the authorities that have been profligate during the past 12 months.

Mr. Heseltine: I believe that the transitional arrangements that I shall be announcing will take into account the factors to which the hon. Gentleman has drawn attention. I cannot change the system without legislation, and in the nature of the legislative process there is no time to change the process for this year's settlement. Therefore, I have no alternative but to use the present basis as best I can and to adopt the transitional arrangements, which I shall outline, as a stop-gap arrangement while we move to the new system that I have already announced.
I propose, therefore, to replace the current grant machinery. My proposals for a new block grant will be included in the Local Government Bill shortly to be laid before the House.
The basic concept of block grant is simple. It is designed, as is the present system, to enable local authorities to provide a comparable standard of service for a similar rate in the pound. However, instead of trying to achieve this through two separate elements of grant—needs and resources—it will do so directly through a single grant paid to each authority. The block grant will be sufficient to bridge the gap between expenditure and the product of a standard rate poundage on rateable resources.
However, this is not open-ended. Standard rate poundages will be determined based on the relationship between actual expenditure and an assessment of standard expenditure—that is, the expenditure which authorities with similar characteristics and circumstances would, on average, be likely to incur in providing a normal standard of services. Standard expenditure will, therefore, be a figure based on facts and not plucked out of the air. As actual expenditure increases above the level of standard expenditure, the standard rate poundage will also increase. That means that the Government will provide grant support at a constant rate for expenditure up to the level of assessed standard expenditure, as under the present system. But the more an authority spends above that level, the greater the proportion of that expenditure it must raise from its ratepayers and the smaller the contribution from grant diverted from other authorities with lower expenditure.
At the same time, I want to see developed—in full consultation with the local authority associations—a new system of assessing authorities' standard expenditure. The new method must be comprehensible, stable and equitable and it must be based on a commonsense look at the factors which affect expenditure. Analysis of actual expenditure patterns should be kept to a minimum. In practice, I envisage a significant threshold above the level of standard expenditure before grant support under the block grant system begins to taper off. No generalised method of assessing standard expenditure can take full account of each authority's circumstances. There has to be a threshold of safety above the standard level of expenditure. Those are the main principles of block grant.
Much remains to be settled in consultation with the local authority associations. In no way do I apologise for the fact that I have left much to be settled in consultation with the local authority associations. It seemed right to me that in introducing the new system, rather than laying down a central concept before consultation, I should have the most detailed consultation with the local authorities in order, as far as possible, to devise with them a system which we all agree to be reasonable and practical.

Mr. George Cunningham: But the old formula was worked out in consultation with local authorities, too. The Secretary of State is criticising the old formula. We all know of its weaknesses, although I believe that one or two of the right hon. Gentleman's criticisms are not justified. The Secretary of State is saying that he will replace it with a new formula, of the content and nature of which he gives us no indication.

Mr. Heseltine: It is unfair to say that I have given no indication. I have given a broad indication of the sort of ways in which I wish the work to proceed. It is true that I have not tried—as a deliberate policy decision—to indicate how I believe the problems should be solved. If I had done so, the local authorities would have been entitled to turn round and say that I was imposing the system upon them rather than involving them in a genuine period of consultation. No.


doubt, the House will want to come back to this subject and there is time, in the process of the legislative arrangements, to go through a detailed and genuine period of consultation, along the lines that I have outlined. We are trying to find better and more comprehensible ways of measuring the individual needs of authorities. That is a matter upon which there must be detailed and lengthy consultation.
The other principle that is equally clear and which I am introducing as a change—

Mr. George Cunningham: What is the first principle?

Mr. Heseltine: To seek other ways to move from the process that is currently settled by regression analysis.

Mr. Cunningham: Is that a change?

Mr. Heseltine: Of course it is. I have made the point to the hon. Gentleman.
The second point that I am pursuing as a matter of principle in introducing the block grant is that there has to be an ending of the automatic assumption that the more one spends, the more one gets. There has to be a system that recognises the need for an incentive to economise, a system which treats authorities fairly. Those authorities that economise—many Labour authorities have done so—know that the price of that economising is not simply that another less prudent authority pockets those economies.

Mr. Cunningham: Mr. Cunningham rose—

Mr. Heseltine: I have given way to the hon. Gentleman and I have made my point.

Mr. John Fraser: With regard to what the right hon. Gentleman calls the tapering provision, which I call a penalty clause, is it his intention that that should operate in the financial year 1980–81?

Mr. Heseltine: The new arrangements cannot be introduced in 1980–81. They can come into effect only in the year 1981–82. However, as I shall mention shortly, I believe that in the climate in which we now conduct our public expenditure programmes there is a need for transitional arrangements. Those arrangements will apply in the year to which the hon. Mem-

ber for Norwood (Mr. Fraser) referred. I should have come to that matter in the course of my speech. The hon. Gentleman has anticipated what I wanted to say.
I have outlined the main priniciples of the block grant. As I say, much remains to be settled in consultation with the local authority associations. But, although the internal workings of any system which seeks to be fair to over 400 authorities is bound to be complicated, ingeneral block grant will be much easier for the wider public to understand. It is a single grant to bridge the gap between expenditure and resources. It will increase the accountability of local authorities to ratepayers. At present, the ratepayer has no means of judging whether the expenditure of his local authority is reasonable. Ratepayers will, in future, be able to make a rough comparison between the standard rate poundage and the poundage that they are asked to pay. If there is a significant difference, the ratepayer will want an explanation which an authority with soundly based expenditure plans should be happy to give. The new system will limit the extent to which a few high-spending authorities can take grant away from other authorities.
I should add—once again—that block grant will not force authorities to levy a particular rate or adopt particular expenditure plans. The amount that they decide to spend will be for them, but they will know that the further it is above the level of expenditure considered reasonable for local government as a whole, the lower the proportion of taxpayer's support they will receive and, consequently, the more they will have to account to their local ratepayers.
The legislative timetable will not permit block grant to be introduced until 1981–82. But, because of the need to tackle overspending now, my legislative proposals will contain provisions to amend the current RSG system, as a transitional step for the one year. Those provisions will allow adjustments to be made to authorities' grant entitlements at increase order stage next year, where there is evidence of serious and sustained overspending. Grant abatement will be made only to resources element entitlements, except in London, where adjustments will be made to the needs element of authorities that do not qualify for resources element.
I shall use these transitional arrangements only if high spending authorities set out to challenge the Government. In any event, I would expect only a small minority of overspending authorities to be affected.

Mr. Roy Hattersley: The words with which the Secretary of State has described his intentions, as is often the case, are unclear. It is important to get the matter absolutely clear. Today he has said that he will use the transitional arrangements only with authorities that set out to challenge the Government. Will he measure that challenge in rate poundage, or will it be his political judgment about what a challenge amounts to?

Mr. Heseltine: The right hon. Gentleman and I will have no difficulty in judging which authorities have set out to challenge the Government. However, there will be one difference between the right hon. Gentleman and myself. I shall encourage those authorities to reduce expenditure, whereas the right hon. Gentleman would have gone round the country actually encouraging authorities to stoke up their expenditure. I very much hope that no authorities took the advice of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and I hope that they will not suffer under the transitional arrangement and as a result have to go back to their ratepayers and explain that they made decisions on his wholly irresponsible advice.

Mr. Hattersley: I am grateful for the repetition of that point, which the Secretary of State has made on every occasion this year, but can he actually answer the question? Is a rate poundage to be attached to challenging the Government? Have local authorities any idea that can be quantified of what the right hon. Gentleman intends to do?

Mr. Heseltine: We have made it clear that we shall judge the position when rate levels have been set. We will judge that position in the light of the expenditure, intentions and decisions of individual local authorities. I wish to be sure that Opposition hon. Members understand what we are talking about. After all, they are responsible for advising their local councils and for the decisions of the House.
The House will be aware that the Government have asked local authorities to reduce expenditure by 1½ per cent. below that of last year, and by a further 1 per cent. next year. Labour Members go round advising authorities not to do it. Some authorities have already said that they have no intention of sticking to the targets, or of even trying to approach the targets established by the Government. There is a prima facie case for suggesting that those authorities have not made any attempt to economise or shown any interest in doing so. As a result, those authorities represented by the bulk of Labour Members will suffer. They will get less money in order to pay for the profligacies of the few.
I cannot turn to my right hon. and hon. Friends, nor to the local authorities that they represent, and genuinely expect them to economise and cut back if a handful of profligate authorities, urged on by the right Hon. Member for Spark-brook, are scooping the pool of consequences. That would be an abdication of responsibility, and I shall not do it.
I have sought to put the rate support grant settlement within the overall context of the Government's policy to pull back public expenditure and the crucial importance of local authority spending. The settlement is, therefore, of exceptional importance. We have put local authorities in a position whereby they can support the Government in the battle against inflation. Within the limits of the present system, I have made a fair settlement as regards the percentage of grant, the cash limit and distribution. I now ask local government to recognise—as many councils do—the critical challenge that we face of constraining public expenditure by scrutinising every programme and searching for every economy.

Mr. Deputy Speaker (Mr. Bernard Weatherill): I understand that, as the Secretary of State has said, it will be for the convenience of the House to take together the three motions in the Secretary of State's name.

Mr. Roy Hattersley: Earlier in his speech, the Secretary of State said that one of the problems of the rate support grant was that only three or four people in his Department fully understood it. As a


compliment to him, may I say that it is clear that the ranks were swollen on 3 May. The Secretary of State described the rate support grant with great clarity and in great detail. I am sure that the House found it an impressive exercise.
However, it was less impressive when the right hon. Gentleman attempted to describe the unitary grant that he proposes to introduce. Discussion of that proposal is best left until the long-awaited local government Bill is presented and until we have a clearer idea of how the Government intend to justify his prejudices. The Secretary of State persists in stating in all the speeches that he makes to parliamentary audiences that his proposals for the rate support grant, the supplementary orders for this year and the principal orders for next, will not result in anything other than marginal differences within local authorities that can be accommodated by good housekeeping and elementary prudence.
My hon. Friends will give the Secretary of State example after example of county and metropolitan area where his proposals result in real, damaging and dangerous reductions in services. He does his cause no good by pretending that the entire paraphernalia of public expenditure reduction can be accommodated by elementary prudence. Apparently he finds that prudence lacking not only in Labour-controlled local authorities but in many Conservative-controlled authorities, which find that the effect of his policies is not one of saving candle ends but of drastically reducing services.
The Secretary of State has an impressive and touching way of assuming that no one is prepared to argue with, or doubt, the validity of the basic policies upon which the Government's intentions and his intentions are based. He talks as if we have to accept the extraordinary economic condition that we find ourselves in and as if it were unavoidable. He talks as if the movement from slight growth to economic stagnation to literal decline were unavoidable. It is not unavoidable, but it is the direct result of the Government's economic policies. With the exception of the precipitate reduction in income tax, everything that

the Government have done since 3 May has been done intentionally to deepen the slump and to decrease industrial activity.
There is not a sensible economic observer who does not believe that the deflation into which the Government have plunged the economy since May was a mistake. It is not even necessary within the terms of their own economic policy, nor is it sensible monetarism. If the Secretary of State has any doubts about that, I refer him to a speech made by the new economic adviser to the Government, Professor Terry Burns. He said:
Secondly, monetarism does not say anything directly about public expenditure…Whilst appealing to market economists in general, the issue of Government spending is essentially a different argument and is not necessarily part of monetarism as it is now being practised.
The Secretary of State should not present himself to us in the belief that we shall accept all the prejudices of Conservative policy and Conservative economics. The deflation of the economy is not to rational people a justification for imposing cuts on local authority spending that will be damaging, dangerous and in many ways unacceptable, not only to the Labour Party but to the people of Britain.
We certainly do not accept the second part of the right hon. Gentleman's argument concerning his relationship with local government. It goes deeper than that, because it fundamentally concerns the nature of local government. That is certainly the case as regards the unitary grant system. We should discuss that system when the local government Bill is presented. However, the so-called transitional arrangements that take us from rate support grant to unitary grant are fundamental to our discussions today. They apply during the life of today's order, and the Secretary of State could not have been more frank about his intention to influence local authorities to accept the pattern of rate support grant settlement that he chooses.
Therefore, even though it is not the law of the land and is not even presented to the House in a Bill but is simply in the mind and hope of the right hon. Gentlemen, we have today to discuss the transitional arrangement.
The intention of the transitional arrangement can be easily described. The Government intend to impose on local authorities a spending ceiling by use of powers that they do not at present possess. They will be included in a Bill which, although specified in the order, through the incompetence of the Government's business managers is not yet presented to the House of Commons. The Government propose a major reduction in the next financial year of the autonomous powers of democratically elected local authorities, which amounts to a constitutional change this year brought about by retrospective legislation.

The Minister for Local Government and Environmental Services (Mr. Tom King): Rubbish.

Mr. Hattersley: I say to the Minister for Local Government and Environmental Services that, if we had the Bill of Rights that the Lord Chancellor and many other Conservative Members are pressing for, exactly the sort of measure that is being proposed would not be allowed because of the effect that it would have on local authority after local authority. If a Labour Government were to impose a penalty on local authorities, the Conservative Party, The Daily Telegraph, the Daily Express, the Daily Mail and The Sun would say that it was totalitarianism, and they would be right because of the effect on local councils.
I remind the right hon. Gentleman and his Minister of State what such a measure will do to local councils. Today, all over the country, councillors are deciding their rate poundage for next year in the light of the RSG about which they now know a good deal. They are deciding whether, in the light of funds that they receive from central Government, they want to increase their rate to supplement the reduction that they must suffer and protect the services in which they believe.
The right hon. Gentleman will not deny that many local councils have the choice between increased rates and reduced services. They have the right under law to increase rates to compensate for losses that they presently expect from the rate support grant settlement. If they exercise that right under the law, and if in March and April rates rise to compensate for those losses, although they

have behaved in a wholly legal fashion they are opening themselves and their local authorities to penalties that will be passed, if the right hon. Gentleman has his way, appreciably after the decisions are taken. They make the rate now under one law, and the law is changed if the local government Bill is passed.

Mr. John Townend: I speak as an ex-leader of a county council. Local authorities always have that problem. They never know exactly what the rate support grant increase order will be at the beginning of the year when they levy their rates.

Mr. Hattersley: It is forgivable for the hon. Gentleman not to follow what I have said, but I do not believe that he will be so easily forgiven for not following what the right hon. Gentleman said.
A large passage in the Secretary of State's speech was concerned with the changes that he is making for the transitional period. I assure the hon. Gentleman that the Vote Office is full of official papers describing what the transitional arrangement will be. The Secretary of State could not have been more clear in saying that, for the transitional arrangements to apply, the local government Bill has to be passed into law. If the hon. Gentleman can give me an example of when, as leader of a council, he had to measure his rates against a notional figure invented in Marsham Street, and when the rate did not conform to that notional figure, he had the grant withdrawn, we shall be able to say that nothing new has happened—because that is what will happen if the Bill passes into law.

Mr. Townend: The right hon. Gentleman misunderstood me. When councils make decisions to levy a rate, they have to make them when the full facts are not always known. Councils always have to gamble on the rate of inflation and on the question whether the rate support grant increase order will compensate the authority in full.

Mr. Hattersley: No one would disagree with that, but the fact that we are persistently trying to draw attention to is that a considerable new uncertainty has developed. If the hon. Gentleman were still leader of a council, he would find that actions that he took totally legally


would be the subject of penalties if the Bill became law.

Mr. King: That is incorrect, and I shall explain it.

Mr. Hattersley: The Minister of State assures us that he will explain later this evening how that is incorrect, and we look forward to that with great anticipation.
The uncertainties are greater than those that I tried to describe to the right hon. Gentleman. It appeared initially that the Secretary of State had it in mind to penalise all authorities that went over his notional limit, but uncertainties have grown. He told us this afternoon—he has certainly said this with accelerating force in a series of documents—that there will be a margin of sin, passing through which a wide variety of authorities will be punished in various ways. He initially said that he would penalise those authorities wih a "large difference" between their notional rate and their actual rate. He went on to say that he would penalise those with a "substantial difference." His third definition was that he would penalise those with a "very substantial difference", and this afternoon he said that he would penalise those that flagrantly challenged the will of the Government.
In a letter sent out by his Department in the past week or so, the position was slightly changed again. The Department said that some authorities would have to spend more than the 119p,but because of their specific individual circumstances the Secretary of State might let them off. It also said that the Secretary of State hoped, believed, wished, that he would have to penalise only a handful of authorities.
In terms of simple constitutional justice, is it remotely right that such arbitrary powers should reside in the hands of the Secretary of State? He will say to one authority "You have broken the limit that I set down but I will let you off", to another "You have broken it, but not by enough for me to cut up rough with you" and to a third "It is not your rate poundage that I am complaining about but your attitude and decision to challenge the Government."
Challenging the Government is a matter not of public expenditure but of politics. The right hon. Gentleman should under-

stand—and I hope that others will grow to understand—that this power has absolutely nothing to do with public expenditure. If, as his letter suggests, he intends to penalise only six or eight authorities, his savings are absolutely minimal. The right hon. Gentleman wants half a dozen scalps to take with him to the Conservative Party conference, and that is what the entire operation is about. It is throwing an uncertainty into the operation of local government which is wholly intolerable, and it has been done for partly political and partly personal reasons.
We shall fight the Bill and explain to ratepayers the standards with which the right hon. Gentleman discharges his stewardship. The Labour Party believes in local government autonomy and the right of elected councillors to make their own decisions for their areas:
Local authorities are usually best placed to assess the needs of their localities and to know the priorities. That is why they are elected. They must enjoy the maximum freedom to use their discretion and not have to refer to civil servants for detailed approval of their policies and proposals".

Mr. J. F. Pawsey: How can the right hon. Gentleman reconcile his latter remark with the 1976 Education Act, where choice was directly removed from local authorities?

Mr. Hattersley: I thought that I might be asked that question. I do not reconcile it. Lord Butler does. His 1944 Education Act said that education was a national service, locally administered. His Second Reading speech made it absolutely clear that from that day onwards there would be a great deal more national description, of the secondary system in particular, than is the case with other services. I am sure that the right hon. Gentleman would like to go down in history in the manner of his illustrious predecessor, and will describe it in exactly those terms—a national service, locally administered, which is what it says in the Act.
Before I was interrupted I was reading—I hope touchingly—from the works of the Secretary of State. I was informing the House of his comments on local authority autonomy—about councillors being best placed to decide the interests of their areas and the importance of keeping civil servants out of the detailed


working of local government. The right hon. Gentleman said that in a speech made in Banbury on 1 July 1978. I assure him that we still believe in that and that we would pursue the policy that he then accurately described, not least because of what the alternative does to local government.
If local authorities cease, in effect, to be housing authorities—and that is what will happen if yesterday's Housing Bill is passed—and if the unitary grant system is brought in—which is what will happen if the local government Bill is passed—one is bound to ask why men and women of talent, both Conservative and Labour, should want to spend their time administering the details of policy that is decided in Westminster. The drift away from local power and local autonomy to the centralised decisions of Marsham Street seems to be fundamentally bad for local democracy and local community.
To the Opposition these powers are wrong in principle. When they are applied, as they must be, against the financial details of the rate support grant order, it becomes clear how bad they are in practice. Before I describe the Opposition's view about the distribution of funds, I must return to one of the supplementary points in the order and in the statement made by the Secretary of State when he announced his intention to the consultative council.
He told the council—he has not mentioned this today—that his assumptions about rates and his decisions about the RSG were based on the belief, hope and intention that local authority rents would be increased by £1·50. Clearly, that has a direct effect on the rate support grant because it has an effect on contributions other than rents to the housing revenue account. The anticipated level of rents is a central issue in the rate support grant settlement, which is why the Secretary of State announced his £1·50 intention at the outset. In fact, he said that he hoped that councils that were legally entitled to do so would increase their rents by £1·50. Some are not entitled to do so because at present they are not allowed to maintain substantial and permanent balances in the housing revenue account. But if the Housing Bill, which got a Second Reading yester-

day, becomes law they will be so entitled. Therefore, I take it from the right hon. Gentleman's statement that if and when that Bill becomes law he will expect an increase of £1·50 in those local authorities' rents as well.
That will result in substantial permanent balances—what in crude terms might be called profits—in housing revenue accounts. In other words, there will be surpluses. When the consultative document on housing policy was issued in November, the Secretary of State said that he would shortly tell the House and the country what would happen to those surpluses. He has not done so. I specifically asked him yesterday what would happen to the surpluses, and his Minister of State either did not or could not tell us in his winding-up speech.
It is extraordinary that we should go through two legislative processes about an issue central to the life of this country—the building un of surpluses or profits in local authorities' housing revenue accounts—when all we know is that the Secretary of State wants local authorities to make and hold this money. He persists in not telling us what he expects them to do with it. I hope that when the Minister of State replies, as well as telling us that this is not a change, he will tell us exactly what will happen to that housing money. In so doing he will make up for the defects of his colleague yesterday evening.

Mr. George Cunningham: Tell us now.

Mr. Hattersley: No. I do not ask him to tell us now. I look forward with eager anticipation to the winding-up speech at 9.30 pm.
In anticipation of that, I shall make two or three comments about the financial settlement. First, it has a superficial resemblance to last year's settlement. The proportion is 61 per cent., as was our settlement. The needs and resources elements were 67·5 per cent. and 32·5 per cent. respectively. The same ratios applied to our needs and resources elements. But there is one way in which this settlement is substantially and significantly different from ours, and that is the way in which cash limits are to be used. I make it clear that I am a supporter of cash limits. Some of my hon.


Friends are not, and most of the trade unions and the public services are not. I believe that cash limits, properly applied, are a necessary element of financial prudence within local government and within national government in the nationalised sector.
There are two ways of looking at this issue of cash limits, and the way in which the right hon. Gentleman looks at it—describing the limit as "an envelope figure"—is a total misuse of that principle.
When cash limits were invented, the idea was that reasonable assessment would be made of necessary approved and unavoidable expenditure. The cash limit describing that would be set, and in order that there should be no frivolous or flippant expenditure that cash limit should not be exceeded.
The right hon. Gentleman has not made an assessment of necessary, agreed or unavoidable expenditure but has made an artificially low estimate so that an artificially low cash limit, in itself, acts as a further cut, albeit a disguised one. I refer to his intentionally Delphic statement that a 13 per cent. cash limit was "compatible" with increases in prices and wages of 13 per cent. That was not a cash limit that anticipated that wages would increase by that amount. It was one that would tell local authorities that they must not increase wages by more than that, otherwise they would have to pay a penalty.
I see the Secretary of State nods as if he approves of my definition. If he does, he is imposing a surreptitious incomes policy on the local authority sector. I am in favour of incomes policies that are not surreptitious. I actually believe that an incomes policy is an essential ingredient in the economic health of this country. But I believe in open incomes policies that apply to the economy as a whole and not in surreptitious ones that apply only to local government. The Secretary of State is not saying that he thinks local authorities will be forced into 13 per cent.—although the figures show that his cash limit is not consistent in 1980–81; he is telling local authorities that unless they hold wages down to that level they have a problem and they will have to sack people or cut services. This is an additional cut, and the Secretary of State should admit it.

Mr. King: I am very interested in the right hon. Gentleman's comments. He criticises what we have done. Perhaps he would tell us his alternatives. Is his alternative to have no cash limits on the increase order, to wait and see what happens to all the wages and then undertake to pay, regardless of whatever wage agreements are reached in local government? Or is he saying that he would take a judgment at a later date on the amounts that he would pay? Does this not leave his alternative open to the earlier criticism that he made—that local authorities would have no idea where they stood?

Mr. Hattersley: Extraordinarily enough, I expected to be asked about that. What I would do for the future is what we announced we would do this year. As part of the pay policy, the national Government must be involved in local authority negotiations. I believe that, as we take part in those negotiations, we must say that any national agreement forged between the local authorities and their unions would be underwritten by the Government. Therefore, if we were party to an agreement, we would pay 61 per cent. of the consequences of that agreement.
I am surprised that the right hon. Gentleman, of whom I genuinely expect better, should have asked me that question, because the former Chief Secretary—my right hon. Friend the Member for Heywood and Royton (Mr. Barnett)—who is becoming one of the gurus of the Opposition on public expenditure, said on 19 March last year that his cash limit intention was that as the Government involved themselves in a proper incomes policy those local authority agreements which were endorsed by them would obtain grants from them.
That seems to be the only way to run this policy. It has the second advantage of being honest. I believe that there are substantial bonuses in that, rather than trying to impose the extra squeeze in this disreputable and perverse way. Local authority associations—at least, the Association of Metropolitan Authorities—calculate that the difference between the honest figure and the surreptitiously low figure, which will result from the bogusly small cash limits, amounts to about £300 million, and that that total, 3 per cent. of the wage bill of local authorities, can


result only in substantial reductions in expenditure and substantial reductions in services. It forces on local authorities the decision to choose between cutting services, sacking employees and increasing rates, or all three things. In some areas, it impinges on their rights and destroys their services more heavily than others.
This leads to my final point on the settlement itself. Anyone who has read previous rate support grant debates will know that the right hon. Gentleman has three passionate beliefs. One is that regression analysis is bad. The second is that it is not helped by what has come to be called dampening. The third is that London in general, and central London in particular, is normally helped to an over-generous degree.
In this settlement, the right hon. Gentleman has observed all of his three prejudices. When he says that the rate support grant has been distributed on a standstill basis, he means that he has used the formula for needs which was applied last year. As a result, he is right in saying that the shire counties get a little more, although not quite so much more as he led them to believe at the county councils' meeting.
That is neither here nor there. I welcome the fact that they have not got as much as promised. I do not believe that there is great advantage in paying more to those people who neither want to spend it nor intend to spend it. Equally, the metropolitan areas have a little more. But the sufferers have been London, in general and inner London in particular. Inner London has suffered because of a strange piece of sleight of hand for which the right hon. Gentleman, who knows about rate support grant, is directly responsible.
In all his statements, the right hon. Gentleman says that the London total was distributed on the standstill basis for which the London Boroughs Association and the Greater London Council had asked. But they asked for that standstill basis of distribution on the understanding that the right hon. Gentleman would update the formula and carry out a needs calculation this year. Standstill to them means something different from what it apparently meant to the right hon. Gentleman. As a result of the right hon. Gentleman's choosing part of their

formula and applying it, but not applying the other part, numbers of London boroughs in desperate social environmental and financial need will be the main sufferers from this distribution. Hackney, Hammersmith, Islington, Lewisham, Southwark and Tower Hamlets are all authorities with substantial social and environmental problems, much greater than those throughout the country as a whole.

Mr. Heseltine: The right hon. Gentleman is making a serious charge. I ought to try to put the record straight. What he suggests is a fiction. The reason why London appeared likely to be losing so much this year is that relative wage levels in London, compared with the rest of the country, have narrowed substantially over the last 12 months. That factor, carried through into the calculations, brought about the changes that I then had to mitigate substantially by adjusting the clawback. That was the major contribution that I made in the discussions.

Mr. Hattersley: I do not doubt that for a moment, but the point that I made holds wholly true. The London Boroughs Association and the education authority asked for two things. One was a recalculation of the needs element and the other a distribution on a specific basis. The right hon. Gentleman chose to abide by their second suggestion and boasted about it in his statement. But he ignored their first suggestion. As a result, London loses a great deal.
I agree with the right hon. Gentleman that he has constructed a safety net through which no one suffers by more than 3p. But he is requiring local authorities to cut down their expenditure and threatening to penalise them if they fail to do so. To say to Hackney, Hammersmith, Islington, Lewisham, Southwark and Tower Hamlets that before they start on the operation they are the equivalent of 3p down on the rates is an enormous burden for those authorities to carry. It is a burden that they have to carry before facing, in common with all authorities, the additional squeeze due to the bogusly small—I almost said fraudulent; but certainly intentionally small—cash limits that the Secretary of State is imposing next year.
How should local authorities respond? The right hon. Gentleman seems to believe that he is doing my character and


reputation deep damage by describing me as chief proponent of resistance to the cuts. That is not quite my role, although I have no great objection to the right hon. Gentleman continuing so to describe me. The right hon. Gentleman claims to believe that this is wrong in principle. In his statement to the consultative council of the authorities' associations, he says that all parties in local government in the past have accepted the judgment of the party in national Government about overall levels of expenditure. That was so when there was a national consensus on these matters and when all believed in preserving and protecting public services, but the Government have spent the last year bragging about how they have broken down the consensus. If they have broken the consensus, they cannot expect to recreate it from time to time on individual items that happen to be convenient to them.
Different councils will react in different ways. All, I believe, will react according to law. That is a special obligation imposed not only on all citizens but especially on men and women elected to democratic local government authorities. But, as they respond, they must make their own judgments on what is best for their areas. They must make their own judgments about the necessities of their ratepayers and about the promises they made when elected. Those judgments need not be influenced by circulars sent to them by the right hon. Gentleman. Despite the extraordinary arbitrary powers that he is taking to himself, and his right—if a Bill yet to be presented to the House becomes law—to descend on local authorities and punish them for using their discretion, Great Britain is not ruled at this moment by ministerial circular.
A ministerial circular is a statement of the right hon. Gentleman's opinion. Until he changes the law in order that these pains and punishments may be exacted, I expect that many local authorities will want to use their own judgment about what is best for their areas. Some may be penalised by the right hon. Gentleman. In the meantime, I hope that they will do two things. I hope that they will be adamant and specific in describing where the blame lies—not simply blame for reduction in services but blame for increasing rates, which are also the

right hon. Gentleman's responsibility, in county after county and in borough after borough across the United Kingdom.
I was delighted to find, on visiting Wales, that two authorities, not controlled by the Labour Party—although I believe that they soon will be—were exercising their proper rights, using ratepayers' money, to explain that when services were closed down this was a direct result of Government action rather than the will of the locally elected councillors. I hope that more authorities will do the same. I hope that they will place the blame where it belongs and that when they have an opportunity they will make sure that where cuts must fall—for some will fall—they fall on the shoulders of the people most able to bear them, specifically the people who benefited most from the income tax reductions six months ago.
Finally, I hope that Labour local authorities will go on making clear that our intention is, for as long as we can, whenever we can, to protect public services during the tenure of office of the right hon. Gentleman and to restore them at the first opportunity.

Mr. Hugh Fraser: The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made what Labour supporters will regard as a fine, rousing speech, but many of us on both sides of the House are devoted to two prime local government and taxation matters—keeping taxes down and rates down. Those are the problems that face the country. It is also important to explain how the rates are arrived at, which is becoming more and more obscure to the average ratepayer.
We in Stafford shire are grateful to my right hon. Friend the Secretary of State for the Environment, because there has been a slight reduction in what might have been the imposition under the previous system, as run by the Labour Government, of about £1·8 million this year. Nevertheless, Stafford shire faces this year an increase in rates, even after the cuts, of between 20 and 25 per cent. This is what should worry every hon. Member.
I should like to say a few words about the presentation of rates to the ordinary citizen, so that he has some idea of what


they are based on and how they are arrived at. Most hon. Members will agree that the principle of multiple regression analysis is about as complicated for a layman to understand as multiple sclerosis is for those who do not suffer from the disease. I can imagine nothing more complex, nothing that has become less understandable to the general public. If we look at the various factors that are brought into the analysis, we find again and again that they are outside the comprehension of the ordinary individual, and certainly of many councillors and councils. I am glad that my right hon. Friend has said again and again that he wishes to be rid of this principle.
Unfortunately, some of my right hon. Friend's proposals, when he goes on to the question of what I think is called the universal grant system, still contain concepts similar to the various factors which I think run very unfairly against individual counties and authorities. I hope that my right hon. Friend will consider a simplification of these factors in the needs element.
The needs element can be laid down by the Minister concerned. I believe that in Stafford shire we have about 14 categories, which I think could easily be reduced in number. I hope that they will be reduced when my right hon. Friend gets to work on the categories. In my view, they could be limited to four—population, education, social services and costs. Stafford shire county council has produced a working paper which I hope my right hon. Friend will consider. The principle that I have advocated would make it much easier to comprehend the problems that are put before the average ratepayer.

Mr. George Cunningham: It is very convenient to suggest that one can reduce this complex apparatus to four variables, but is the right hon. Gentleman seriously suggesting that, for example, the area of the rating authority should not betaken into account? Is he seriously suggesting that the speed of population rise, which imposes severe burdens, and the speed of population decline, which imposes severe burdens on other areas, should not be taken into account? Does he not think that if one gets down to it one must have one factor after another, and that in the end one will return to

something that is almost as complicated as the present arrangement?

Mr. Fraser: I take the hon. Gentleman's point. Population is a broad category, but at present a great deal of the needs element is worked out on data which are out of date or do not exist. Much of the data is computerised, and there is a data freeze which means that the figures are often two or three years out of date. This is one of the great problems facing the Government.
I am very nervous about what my right hon. Friend proposes as regards the unitary grant system. I am sure that he is having consultations about it. It could mean that a needs grant would have to be applied to the 430 local authorities, which would be even more complex. This is worrying. It would put an extreme burden on my right hon. Friend's Department and it could be dangerous in the hands of successor Governments, who might use this method of controlling local expenditure against the interests of an authority's citizens.
Therefore, I hope that my right hon. Friend will have long and deep consultations before the unitary grant is imposed. I hope also that in the process the needs element will be more simply assessed than it is now. I hope that my right hon. Friend will bear in mind Stafford shire county council's working paper proposing simplification, which would be of great benefit.
The burden of local government expenditure has risen, is rising and needs to be checked, but an even more serious factor is now emerging. It is that some of Labour's efforts to patch up inner urban areas, to transfer money from the slightly better-off areas to central London, Glasgow, Liverpool or wherever, are merely cosmetic and do not deal with the main problem, which is much more serious than the question of rates or even Government grants in one year. Inner city decay is far too serious to be dealt with by switching a few million pounds from one county to an inner city area. I know that my right hon. Friend is considering the problem and that one day he will take action. It is probably the biggest environmental problem that the country faces, and it cannot be met by such measures as moving a few million pounds from Stafford shire.
We in Stafford shire are grateful for what my right hon. Friend has done to help us this year. We are fearful of the rate burden that will still have to be imposed after the cuts that our county council has made. We ask my right hon. Friend to look very carefully at the question of the unitary grant before it is imposed on the country.

Mr. Peter Hardy: Thousands of my constituents are currently in despair and in a state of considerable anger because of the steel strike. Therefore, I propose to speak very briefly, as I should like to have an opportunity to say a word about that matter tomorrow. However, I believe that I should also speak this afternoon, because, although thousands of my constituents are steel workers who are currently feeling anger, I have even more constituents who will feel distress and despair as a result of the arrangement that the Secretary of State has commented on relatively briefly and slightly.
I did not believe that the shabby and not entirely honest approach of the last Conservative Government in the months before the February 1974 election could be repeated, but it seems to me that there is a real parallel now. I suppose that it was understandable that in January 1974 that Government should have been rather less than frank and less than honest in their presentation of the local government financial arrangements. An election was impending, and I suppose that the temptation was great. But we are perhaps quite a long way from an election, and the right hon. Gentleman's partisanship and less than fair presentations are not at all justified.
I believe that the rate support grant statistics were demonstrably out of date as soon as the right hon. Gentleman delivered the assessments, and that he knew it. I believe that the basis of his calculation is grossly inadequate. I do not think that he has allowed for the level of interest rates which applied at the time the grant was announced, and it certainly will not counter the enormous effects of the high interest rates that have since developed.
The right hon. Gentleman has left local government to bear a heavy burden that has been compounded by his contempt for service in local government. I say

that regardless of party. People of all parties devote their leisure time to serving their communities, and their capacity to serve, and meet the needs of, those communities has been greatly imperilled. Despite the obvious contempt in which the right hon. Gentleman holds local government, I hope that he will have meaningful consultations with the local authority associations in the next few weeks about two or three important matters.
First, the right hon. Gentleman should reconsider the level of increase orders which he clearly knows will be necessary during 1980. Secondly, he should consider with the local authorities a case for necessary changes in his proposal for capital expenditure arrangements. Perhaps at the same time he can consider with local government the appalling effect of his policies on the building and civil engineering industries. They are already benighted and will be crucified as a result of his policy during 1980.
I hope that the right hon. Gentleman will be more frank and less ambitious in his approach to waivers. My authority, Rotherham borough council, is precepting for the current year at 116·9p in the pound. The right hon. Gentleman says that that authority will have to levy an increase within 116·9p in the pound. There is no way in which our borough council can meet his requirement. It will be an offender entering the area of sin to which my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) referred.
The right hon. Gentleman suggests that councils—already prudent—should carefully monitor appointments as vacancies arise. The already prudent Rotherham council, which cannot meet his target, has operated that procedure for a long time. The problem is not the result of political extremism or anything of that sort. I believe—and I do not think that the right hon. Gentleman has adequately considered the point—that the smaller metropolitan authorities, such as we find in Yorkshire, whether Labour or Tory-controlled, have a particular problem.
Areas such as mine, consisting of smaller and older industrial communities, with some rural seats normally identified with the affluent shire counties, also have severe problems. The distribution and


apportionment of grant does not take account of those problems. This is not the first time that I have made the point. Some hon. Members may remember that I criticised my own Government in November 1978. Some advantages ensued in 1979, but metropolitan authorities with populations under 350,000 could be at a particular disadvantage.
I notice that the Under-Secretary of State, the hon. Member for Shipley (Mr. Fox), who should be aware of the problems of smaller metropolitan areas, is moving his head. I do not know whether he agrees with me or not. Those authorities face difficulties. They are exercising prudence and seeking to meet needs, and I hope that they will continue to do so. However, it seems to me that the rules under which local government must operate in 1980 will make their task exceptionally difficult.
I hope that the right hon. Gentleman will realise sometime during the year that, though his personal ambition may be important, the maintenance of education services and the care of the growing number of elderly people—a problem causing distress and anxiety to many hon. Members—will not be ensured unless he adopts a more generous and thoughtful attitude.
I trust that I am not being unfair to the right hon. Gentleman, but it has been said that he does not like his job and that he would prefer another important Department of State. I hope that the comment of my right hon. Friend that there is a strong suspicion in the country that the Secretary of State is looking for a few scalps to dangle before the ladies at the Tory Party conference in a bid for more popularity in the party is not correct. If it is correct, and if it results in the right hon. Gentleman's being transferred or promoted to some other high office, I hope that his attitude will not have been maintained to the point at which the whole of local government—Tory or Labour-controlled—will say, as it is justified in saying now, that the Department of Industry's loss is the Department of the Environment's gain.
If that movement were the case, I suppose that the price of those half-dozen scalps would be relatively modest. Far though we may be from a general election, the right hon. Gentleman is not being fair and honest in maintaining

the position which he has so far outlined.

Mr. Fergus Montgomery: I am glad that this year we are having a full day's debate on the rate support grant. Those of us who were here at this time last year will remember that on the day when we should have had this debate the Tribune Group mounted a campaign which meant that we, then in Opposition, lost a Supply day. That Supply day was then moved to a day when the Government said that we were to have a debate on the rate support grant. Therefore, a whole day on the rate support grant was lost. We did not begin the debate until after the 10 o'clock vote. We had four hours' debate. That is how much the then Government cared about the rate support grant. Mr. Deputy Speaker at that time said that we were to have a debate within a debate, because the Scottish Members also took part. Many hon. Members sat until the early hours of the morning and never got the chance to discuss this important issue.
My constituency is in an area adminisstered by Trafford council, which is a new authority. It was set up during local government reorganisation and it consists of seven smaller local authorities. When the Labour Government announced the rate support grant figures in 1974, we were given 50 per cent. of what could have been expected for each of those seven smaller authorities had the old system applied. The hon. Member for Manchester, Gorton (Mr. Marks) shakes his head. I ask him to check the facts. At that time Trafford had a massive rate increase, perhaps the biggest in the country. Trafford's basic problem was that prior to reorganisation no part of the new borough of Trafford had enjoyed county borough status.
None of those smaller authorities, therefore, had a social services department of its own or was itself a local education authority. The reasons for the increase put forward at the time were that it was difficult to assess the grant for a new authority such as Trafford. We therefore had to start from scratch with parts of Lancashire and Cheshire. Disparate problems—as, I am sure, hon. Members will admit—are created by the merging of such areas.
Although the council has tried over the years to be careful about spending the ratepayers' money, we have, in successive years, been clobbered by the rate support grant. My right hon. Friend was absolutely right to say that the policy of the late unlamented Government was to pour money into spendthrift councils and to deprive thrifty councils of necessary cash.
Trafford's problem results from the way in which the resources element has been worked out. In 1979–80 the resources element for our council was £2·8 million, but that accounted for only 3·7 per cent. of expenditure. That element worked out at £12 per head of the population. That figure is far and away the lowest in Greater Manchester county and is derisory compared to the £91per head that is paid to Wigan.
The resources element is the root cause of many of the problems in my area and has plagued us ever since the formation of the Trafford authority. It arises from the so-called relative wealth that Trafford enjoys due to its rateable resources. The effect appears to be that the resources grant tends to allow those authorities with low resources to spend more without undue effect on their ratepayers. Trafford ratepayers have suffered as a result of the treatment that we received from the last Government.
In 1971–80 the average domestic rate bill was higher in Trafford than anywhere else in the Greater Manchester area, and yet the rate levied by Trafford was below average. The rate support grant for Trafford was £96 per head of population, but over the whole of the Greater Manchester area it was about £166. That is one of the difficulties with which Trafford has had to contend.
It is not easy to explain the complexities of the rate support grant to constituents who complain about their rates. It is particularly difficult for a council that has tried desperately to keep down expenditure and consequently is penalised by the amount of rate support grant that it receives. We hoped that we would have a fairer deal under the new Government. The settlement was greeted with relief in Trafford. We feel that we are being treated more fairly. Had we received the same treatment when the Labour Party was in power, many of our problems would have been avoided.
The Labour Party has much to answer for. The Labour Government determined the needs element of the rate support grant on the basis of multiple regression analysis. That is difficult enough to say; it is even more difficult to understand. That method relies heavily on out-of-date statistical information.
The right hon. Member for Stepney and Poplar (Mr. Shore) moved resources from the shire counties, where the populations were increasing and the demand for services was increasing as a consequence, to the conurbations, where the populations were decreasing. Perhaps I am being cynical, but it happens that the shire counties tend to be run by Conservatives and the conurbations by Socialists. There is no doubt that the right hon. Gentleman, with an eye on the forthcoming general election, urged local authorities to spend more. That there was no economic growth did not seem to bother him, because the game was how to win the election. Fortunately, the British people were not as gullible as the right hon. Gentleman thought they were.
We must accept that the economy is not in good shape and that public expenditure must be contained. Far too high a percentage of GNP is being used for public expenditure. As a consequence, taxation is too high. In order to create new wealth, we must reduce the burden of taxation and encourage incentives. If we create new wealth, we shall be able to afford socially desirable programmes and live within our means. My right hon. Friend the Secretary of State is being completely fair with the settlement. After the general election he asked local authorities to cancel the 1½ per cent. increase in expenditure that his predecessor encouraged. He then asked for a further reduction of 1½ per cent.—a total of 3 per cent. That is much in line with the last Government's proposals, when the International Monetary Fund had to intervene and censor the rate of public expenditure. In view of that, the screams of anguish from the Opposition sound rather hollow.
The Secretary of State is asking local authorities to effect economies. Because of that, and because he is asking them to take action that is not easy, he has maintained the level of central Government assistance at 61 per cent. The fairness of the settlement is illustrated


by the reactions of the local authority associations. The Association of County Councils, the Association of Metropolitan Authorities and the Association of District Councils are, of course, not delighted with everything in the rate support grant settlement. However, they have accepted it overall. They have said that they are aware of the economic problems facing the country and of the Government's determination to reduce inflation. They believe that, taking those factors into consideration, the settlement is fair.
My right hon. Friend the Member for Stafford and Stone (Mr. Fraser) is right to fear that ratepayers will be faced with substantial increases this year. I wonder how long we can continue the present domestic rating system. Before the 1974 general election, the Conservative Party promised a change in the system. The pledge has been pushed into the background.
Since then we have experienced four and a half years of Socialism, with enormous increases in taxation. I realise that the present Government's priority is to reduce direct taxation in order to get the economy moving. I hope that we shall find an alternative system of raising local government finance. The present system is grossly unfair. It takes no account of a person's ability to pay. I am sure that every hon. Member knows of elderly people living alone who pay exactly the same rates as the family next door with four wage earners. The houses are identical and, therefore, the rate bills are identical.
Rate rebates help marginally and offer some relief to hard-pressed ratepayers. However, water rates are now levied on the basis of rateable value and there are no rebates on water charges. That causes great bitterness and a sense of injustice, particularly among the elderly and the retired.
I welcome the rate support grant settlement. It attempts to be fair. I hope that we shall have a clear indication that the Government are still examining means of changing the present antiquated rating system and that they intend, before the end of this Parliament, to introduce a fairer system for raising local government finance.

Mr. Kenneth Marks: I agree with the hon. Member for Altrincham and Sale (Mr. Montgomery) about the difficulties experienced by some authorities created under the Conservative Government's reorganisation of local government in 1973. Trafford was formed from seven authorities. Part of Tameside is in my constituency. That was formed from nine authorities. The Knowsley authority has a similar problem. The difficulties of administration are caused partly because the municipal buildings are scattered all over the place. Whichever Government are in power should examine those problems.
The Labour Government did examine the problem. They did not make the reductions in rate support grant that the hon. Member for Altrincham and Sale claimed they made. He said that Trafford has the lowest rates in Greater Manchester, but he should consider whether that council is doing its job. He did not say whether he agrees with the cuts in education made recently by that council.
The right hon. Member for Stafford and Stone (Mr. Fraser) talked about inner cities. He said that the solution to their problems cannot be achieved simply by transferring money from shire counties to inner cities. Our inner cities policy made an effort to solve the problems. We made a joint examination, by central and local government, and we took joint action. The same policy could be adopted for the shire counties. I am not sure that increasing rate support grant to the county councils will solve the problems of the less-well-off people in those counties. The problems should be examined jointly by central and local government. The Government should find the money to attack the problems.
The right hon. Member for Stafford and Stone suggested that there should be a data freeze. That is precisely what we do not want. Multiple regression analysis comes in for much criticism. Sometimes I wonder whether it is not a little like democracy—the worst system, except for all the others. We have no idea whether the proposed system will be better.
The right hon. Gentleman may have ideas that he intends to discuss with


local authorities, but we do not know what they will involve, whether they will involve civil servants from the regional offices visiting the various authorities and deciding what the needs are.
In the past I visited a number of local authorities which suffered a great many disasters—coastal erosion, flood, blizzard and pollution of the air and water. However, the impression I get now from visiting local authorities—not simply those that are Labour-controlled—is that there has been no greater disaster than the appointment of the present Secretary of State, although perhaps the Tory reorganisation of local government in 1973 would run him a close second.
Is the right hon. Gentleman aware of the effect of his solution on particular groups—young families, for instance? I am referring not to those on supplementary benefit but to those on low wages who need the incentive to work. Probably no group has suffered more from the Government's policies than families in this group—a family in which the husband is working on a fairly low wage, with children to support. I suspect that if the right hon. Gentleman knew of the effect he would not care.
I remember when the right hon. Member for Worcester (Mr. Walker), who is now Minister of Agriculture, Fisheries and Food, became Secretary of State for the Environment. I recall his visiting city centre areas and industrial towns and being profoundly shocked at the conditions. I do not believe that the current Secretary of State is capable of being shocked. He is perfectly happy as long as the Conservative Party conference is happy. However, his proposals, combined with those of Treasury Ministers and Ministers in the Departments of Education and Science, Social Services and others, attack the young family. We heard this afternoon about the increases in gas prices. Those families will cop it. There has been news about a freeze of child benefits. That, too, will hit the same group. In education there will be big increases in school meal costs—particularly with Conservative local authorities—and school transport charges. That large, valuable and important group of families is being made to bear the brunt of the cuts.
The Secretary of State ordered, demanded or asked for—whatever the term

is—a freeze on local government recruitment as soon as he took office. Such a freeze can be one of the most stupid of measures. One of my local authorities imposed such a freeze when the Conservatives came into power locally. It delaved the placing of every advertisement for 10 weeks. Posts for health inspectors, highways inspectors and so on, jobs which are needed to assess requirements, were simply not filled, and the whole programme was delayed. That kind of staff shortage caused by a freeze harms the very efficiency that the Secretary of State is demanding.
The right hon. Gentleman demanded a 3 per cent. cut from the local authorities to enable them to make the adjustment to the lower levels of expenditure that were coming. The cut was to get them in the mood. Then he said that he would assist them by giving them greater discretion. At the time, I asked him what he would do if councils failed to carry out their statutory obligations as a result of making the cuts. He replied that he did not expect any local authorities to do that. However, he is removing the statutory obligations on local authorities to carry out functions that are necessary to provide decent services. The Secretary of State is not the only Minister to do that. He and his colleagues are producing a series of measures concerning public services which can be designed only to worsen them. They have done it in such a way that the local authorities—this applies certainly to Conservative-controlled Trafford and Labour Manchester and Tameside—will get the odium and blame for what is to be done.
In his speech to the local authorities, and again today, the Secretary of State spoke of the drift of grant from the shire counties and the metropolitan areas generally. I was amazed to hear that the metropolitan authorities had had an increase in the proportion of the total grant of 0·7 per cent. in five years.

Mr. King: This is a complicated subject, and I understand the hon. Member's difficulty. He is confused over the change this year. The drift over the period to which my right hon. Friend referred is not from the shire counties to the metropolitan districts, but much more from the shire counties to London.

Mr. Marks: But the attack is largely upon the metropolitan districts, some of


which are being considered, though not named, as the big spenders.
One of the problems facing councils in their consideration of this year's rates stems from the announcements that have been made in respect of the rate support grant about the unitary system and the temporary measures to be taken this year to achieve it. I believe that the Government are building a new grants system on an ossified rate system, using completely out-of-date rateable values. When those rateable values were originally set, there were a great many anomalies throughout the country. In certain areas they are much higher than in others. In Wales, for example, they tend to be much lower. This is not simply a question of the amenities. It is because the district valuers who did the job were used to doing it for a particular area. That should be considered with the introduction of any new grant.

Mr. Gordon Oakes: Quite the reverse of that is that the Government have postponed the 1981 revaluation, which will make the position the worst it has been for years.

Mr. Marks: We do not know when it is postponed until. No date has been given for a possible new revaluation. These transitional arrangements for the new unitary grant are worrying councils at the moment.
Both authorities in my constituency ask whether they are regarded as one of the big spenders. The Secretary of State spoke this afternoon—I think that my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) missed the additional definition that the Secretary of State gave about "substantial" and "very substantial" and so on—about local authorities that indulge in serious and sustained overspending. What did he mean by "sustained" overspending? Did he mean for the next three years or for the past three years? Will the matter be judged simply on this year's rate poundage, or will the past be considered?
Let us consider Manchester, for example. Its present rate at £1·25 is 6p over the standard which the Secretary of State is suggesting. If that goes up 10 per cent.—and we have heard of some rates going up 25 per cent—will Man-

chester be regarded as one of the big spenders? Manchester does not regard itself as overspending. It has had the backing throughout the years—in spite of the unpopularity of Labour Governments—of the electorate, because the councillors have retained their hold on Manchester. They have done what they have done honestly and openly and have put the facts to the people, spelling out the requirements, as have other metropolitan authorities which might be accused of being big spenders.
Where do such authorities stand on this matter? In working out the rates, they have to consider whether the Secretary of State will penalise them. They must consider whether they will need to impose an even bigger rate to pay the punishment that they will suffer for going too high. They have no idea, and they are now discussing what their rate poundage should be for the coming year. The Minister of State owes it to those local authorities to be much more explicit when he replies to the debate than the Secretary of State was.
Let me give an example of what may be regarded as overspending. The city of Manchester sends 50 per cent. of its children aged between 3 and 5 to nursery classes or nursery schools. I think that Trafford sends 10 per cent. Who is doing the job? What are the needs of the areas? I believe that it is for those local authorities to decide what they should be spending on education and whether nursery education, which Manchester regards as vital to the whole education system, should be provided. This applies to a great many other matters, such as pupil-teacher ratios and so on. What we have before us is an incentive to some authorities to increase their rates to more than they would have done. I hope that the Minister of State will consider that carefully.
I put one other specific question. Where there are county and district authorities, which authority is to be punished? The city of Manchester has two lots of rates—and so does Tameside. It has its own and it has the precept which the Greater Manchester council, which is of a different political persuasion, puts on it. If they are to be regarded as big spenders and spend substantially more, or if we use the other definitions given by the Secretary of State, who is to do the suffering—the county or the city, or both?
It was in the 1930s that we last heard the expression "guns before butter". What we have been hearing from the present Government—I say this despite recent events—is "guns before education; guns before meals for children; guns before child benefit."
I hope that we shall examine whether we seriously need the expenditure that is being made in other fields and whether, for the future of our country—and that is what we are talking about—the kind of expenditure that local government makes is not the most essential expenditure of all.

Mr. Graham Bright: This debate on the rate support grant for the next financial year is of great importance to the country. For many years, local authorities have been undertaking a growing range of responsibilities. An increasing proportion of total Government spending has been in their hands. The burden on the taxpayer and the ratepayer has grown accordingly. As the people of Britain recognised last May, there is a clear limit to the amount that they can be expected to pay. That is a fact that we should all recognise. I congratulate my right hon. Friend the Secretary of State not only on recognising it but on translating it into action by the Government. His proposals are realistic and will remove the anomalies that have developed in the past five years.
The biggest problem that local authorities have had to cope with recently has been the formula employed to calculate their spending needs. If there is an uglier combination of words in the English language than "multiple regression analysis", I have yet to hear it. The way in which these calculations were made and the formula was altered from year to year for the purpose of shifting resources to inner urban areas was objectionable in principle and damaging in practice. One does not solve the problems of the cities by starving the rest of the country of resources. I am sure that my right hon. and hon. Friends will welcome the fact that the drift of resources away from the counties has at long last been stopped.
My own county of Bedfordshire, which has had to cope with continuing immigration from London and Birmingham, has suffered from much more severe financial

pressures than were necessary. Our rate now stands at 99p in the pound. As a result of my right hon. Friend's announcement on 16 November last year, we shall get the equivalent of an extra 2·3p. This is a small but welcome step in the right direction. But this new formula must be flexible enough to take account of special local needs, such as the high level of loan servicing and capital expenditure necessary in Bedfordshire.
I hope that this is a point on which the House can be more fully informed in the debate. It is one that I hope my right hon. Friends will follow with more pronounced effect when the new formula is worked out.
Quite how high a proportion of Government expenditure local authorities should be responsible for is a matter for the Government and the House. In the present economic situation, public spending and local authority spending have to be cut. The planned reduction of 4 per cent. in expenditure for 1980–81 that has already been announced represents relief from an illusory target. A total bill of £15,737 million is a reasonable sum.
I welcome the fact that central Government support is to be maintained at the 61 per cent, level. Local authorities need stability if they are to meet their commitments. I am particularly pleased that the level of domestic rate relief is to be kept at 18½p in England and 36p in Wales.
The pressure on domestic ratepayers has to be kept under very strict control. They are the people who will suffer if the effects of inflation on local councils get out of hand. Strict cash controls on the overall level of spending and on the allowance made in the increase orders is vital. I can assure my right hon. Friend the Secretary of State that he will have my full support in adhering to the limits that he defined two months ago.
The steps that the Government have already taken are the right ones. We are fully entitled to ask local authorities to accept national responsibilities. We are entitled to define the guidelines within which they operate. But it is for local authorities themselves to define their own priorities. Some steps have already been taken. Local authorities now have greater discretion in providing and charging for certain services and in relaxing


planning controls. Over 300 controls and requirements set out in Government circulars have been eliminated.
The new system of capital expenditure envisaged in the Government's consultative paper will allow local authorities more flexibility in determining their priorities. Provided that central Government allocations are equally flexible, there will be an important extension of local control in this area. Overall control at the centre must not restrict local choice. Bedfordshire must not have to submit inordinately detailed plans for approval by each and every Ministry. Provided that it is within the national standard, it should be free to act.
There is only one thing missing from this impressive list of measures—the most important aspect of local government finance: the reform of the domestic rating system. Domestic rates are an antique, unjust and highly inappropriate form of taxation. The system makes no distinction between the resources of ratepayers of vastly different means and it is subject to considerable geographical variation. It is a form of taxation that the Conservative Party has long been pledged to reform. It is a form of local taxation that I and many of my hon. Friends are determined to see replaced before the end of this Parliament.

Mr. George Cunningham: By what?

Mr. Bright: I fully support the reforms that my right hon. Friend has made. I ask, in response, for a recognition of the urgent need to relieve the domestic rate-payer of the burden he has borne for too long a period. This will complete the programme of reforms on which so promising a start has been made.

Mr. John Fraser: I should like to start with what I suppose is a head note but which is really a footnote. I agree with what was said by the hon. Member for Altrincham and Sale (Mr. Montgomery) about the necessity for rebates on the water rate. The extent of rate increases has been disguised by the extent to which some local government expenditure has been transferred to water authorities, not only for the supply of water but for sewerage.
I rise mainly to oppose the orders and to speak largely about the London borough of Lambeth. I make no apology for doing that. I was elected to fight penal increases in taxation, because that is what one expects in terms of rate increases.
I do not defend gross attacks upon welfare and local government services—housing in particular. According to this Government, if an authority decimates its services, it is extremist and is acting in defiance of the Government. That, of course, will happen in some London boroughs. I do not apologise for mentioning Lambeth in that respect, because it is typical of other London boroughs.
Will the Minister tell me, either in his winding-up speech or during my speech, whether Lambeth is one of the relatively few boroughs which, on present assumptions, will be subject to the transitional provisions to which the Secretary of State referred?
Lambeth has two characteristics, shared by other London boroughs, which the Government choose either to ignore or to suppress. The first is that, if the standard of services per person is to remain constant, it requires an increase in the needs element in the rate support grant which goes to a borough such as Lambeth. One visualises that the needs in inner city areas will go on increasing in terms of the number of children in care, the number of old people and the symptoms of poverty with which we have to deal. That is the first thing that the Government fail to take into account in the inner London boroughs.
The second thing that the Government fail to take into account is what still remains a desperate and urgent housing shortage in Lambeth. Recently I took a selection of housing cases on one day only for Norwood in the borough of Lambeth. I should like to quote briefly from that one day's correspondence. The first letter reads:
When Mr. X was interviewed by the Homeless Families Unit he was advised that the Council could not assist him with alternative accommodation.
Lambeth has a good housing record.
…he had no children, his wife was not pregnant and both of them enjoyed good health.

Mr. John Major: Is not the fact that assistance was not


available a clear indication of the need to revive rather than to destroy the privately rented sector, as the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) suggested yesterday?

Mr. Fraser: The legacy of misery in my borough and constituency has come largely from the abuses of privately rented accommodation.
I take a second letter, which reads:
The period of deferment expires at the end of November 1979, but, on checking, it is apparent that there are over 1,000 more highly pointed applicants who have priority for rehousing.
A further letter reads:
I am informed that a notice has been served on the owner of this property for substantial disrepair, and the council will carry out works in default…However, the property is not unfit and no action in respect of closure is proposed.
I refer to another example from the same day's correspondence relating to a house in multiple occupation, in gross disrepair and in need of fire escapes. There were many hundreds of families further up the waiting list and nothing could be done. My experience and that of many other inner London Members is of a despairing and tear-jerking list of housing cases which come to us every week despite everything that has been done.
The growing needs, expressed in needs element terms in the rate support grant, and the continuing urgent housing problem are not properly understood. The housing problem in inner London has got worse as a result of the Greater London Council's transfer of the outer London estates and the reduction in the amount and supply of accommodation which comes from the GLC.

Mr. King: I am asking this question not in a pejorative sense but out of genuine interest in the hon. Gentleman's comments. I have heard it said that Lambeth has more empty housing than any other authority in London in proportion to its housing stock and that it has the greatest rent arrears. I do not know whether that is correct, but, as the Member for Parliament for that area, the hon. Gentleman will be concerned about that matter. Would he care to comment on it?

Mr. Fraser: Rent arrears in Lambeth amount to about £3 million. That is too high and something should be done about it.
Lambeth has a number of empty houses, but the figure is distorted. If a local authority has a large housing and rehabilitation programme, which Lambeth has, there are bound to be empty houses. The bigger the programme of rehabilitation, the greater the number of unoccupied houses during that process of rehabilitation. I think that that to some extent explains those two matters.
I turn specifically to the effect of the orders. I shall deal first with the increase order for 1979–80. For Lambeth it involves a cut in expenditure for 1979–80 not of 3 per cent. but, because of the way that the cut of 3 per cent. across the board operates, of 4½ per cent. Put in another way, the increase order will involve a loss of £2·1 million for Lambeth borough council, or the equivalent of a 3·8p rate rise. That is a substantial incursion into the finances of a local authority which is already hard pressed both on services in general and housing in particular.
I turn now to the increase order for 1980–81. The Government require a reduction of 5 per cent. in relevant expenditure. That will involve Lambeth making a cut of one-twentieth in its services or, in cash terms, a cut of £8·6 million in rate support grant on top of the cuts which must come as a result of the increase order.
In order to maintain services at their present level—for example, the housing programme—we shall require a rate increase, discounting a rent increase, of about 56·3 per cent. Because of the extent to which the Government have failed to take account of the growing needs of the borough and because of the way that the grant has turned out in Lambeth, we are left with a cut for last year of about £2·1 million and for 1980–81 of about £8·6 million in a total budget—housing apart—of between £60 million and £70 million. That is a substantial cut. It is a cut which goes beyond decimation. In order to compensate for the cuts set out in the orders, there would have to be a rate increase of 10·5p before taking account of the effects in inflation, which would clearly


lead to a substantial rate increase, and the effects of the increase in the minimum lending rate. That is without taking into account one penny of the housing revenue account, and that is where the greatest problem arises.
This Government—and to some extent their predecessors—have rightly allowed capital programmes for housing to go ahead but have not been prepared to subsidise the results of that capital expenditure. Over the past four years Lambeth has had £30 million of capital expenditure, none of which is to be allowed for subsidy purposes. There is no dispute that we need to spend this money on housing if we are to show concern for the dignity, welfare and standard of living of our constituents. Yet Lambeth had capital expenditure of £30 million over the past four years on which it is to get no subsidy at all. That is where the biggest element of the prospective rise in rates will come.
It is no use talking about rent increases. I said that I discounted rent increases in the anticipated rise of about 56 per cent. in the rate poundage. But we cannot get that much from rents. If we were to put up rents in Lambeth by 10 per cent., we would reduce the rate increase by about 2 per cent. Likewise, if we put up rents by 20 per cent. we would decrease the rate increase by about 4 percent.
If we want to put our housing revenue account into balance and if we want to compensate for the lack of subsidy on our housing programme, we shall have to increase every council tenant's rent by an average of £14, not the £1·50 standard, or charge a rent of between £55 and £60 a week for every new unit of accommodation provided. That is the rub. We cannot get over this by merely increasing the rents of council tenants.

Mr. King: The arguments that the hon. Member for Norwood (Mr. Fraser) is advancing seem to be consistent with what I believe has been the situation in Lambeth, where I believe rents have not altered since 1977. Can he confirm that that is correct and that the view is that there is no point in increasing council rents?

Mr. Fraser: It is true that, in accordance with a programme that was put forward by Labour councils at different

elections, rents have not been increased over that period. But what I am trying to put into context is that the rent increases would not make a substantial diminution in the expected rate increase resulting from the Government's policies. The truth of the matter is that a borough such as Lambeth is caught in two jaws—the jaw of the decrease in rate support grant as a result of the freezing of the needs element and in the jaw of a Government who fail to provide enough subsidy to finance the capital rightly invested in council housing programmes in previous years to deal with the appalling housing conditions in which some people have to continue to live.

Mr. John Townend: If what the hon. Member for Norwood (Mr. Fraser) says is correct, Lambeth now faces the same problem as many shire counties faced under the previous Government.

Mr. Fraser: I am afraid that is not right, because in terms of housing need there can barely be any comparison between the conditions in inner city areas such as Lambeth and the shire counties. That must be beyond dispute. Perhaps the hon. Member for Bridlington (Mr. Townend) will tell me whether his authority has a housing waiting list of 15,000 families and with about 500 people not only homeless but accommodated in hotels and guest houses because no council accommodation is available. That is the measure of the housing problem that we have, and it has been made irreparably worse because of the actions of the Greater London Council in getting rid of its out-of-county estates and putting a cordon round Lambeth, turning it into a housing ghetto. That is the result of the policies that have been pursued both by the Government and by the Conservative-controlled GLC.

Mr. John Heddle (Lichfield and Tam-worth): I am most grateful to the hon. Member for Norwood (Mr. Fraser) because he has given way so generously on a number of occasions. It seems as though he is pleading a special case for wanting to spend more and more money to accommodate people who are putting pressure on his council's housing waiting list. However, he also admitted a few moments ago that his borough probably has more vacant properties than any other London borough. I should like to ask


him two questions, one of which overlaps, as my hon. Friend the Member for Huntingdonshire (Mr. Major) said a moment ago, the Housing Bill that we debated yesterday.
First, does the hon. Member agree that the short hold provisions in that Bill will reduce the pressure on his borough's housing waiting list by reaccommodating those people for whom new housing will otherwise have to be provided in existing vacant property? Secondly, does his borough pursue the excellent scheme of homesteading set up by the GLC?

Mr. Fraser: My borough does not pursue the homesteading scheme of the GLC. I know perfectly well that some of my constituents are denied the chance to be rehoused because of the policies pursued by that county authority. Furthermore, the figure for vacant accommodation is not the same as the figure for empty accommodation that is available for occupation. If one looks at the extent of the rehabilitation schemes in the borough, one understands immediately why there are empty premises. Many of those premises are actually in the course of acquisition for rehabilitation. So it is a red herring to talk about the number of empty properties that are available.
Given the present arrangements for the rate support grant, and given the failure of the Government to subsidise the capital expenditure that they have generously made available for the provision of new housing, discounting any rent increase, we are faced with an increase of about 56 per cent. in the rates. That is a horror story for one's constituents, if no other policies are pursued.
But that is not the end of the horror story. A further instalment is likely to come in November 1980. That is when the Government will have powers under the local government Bill and can operate the transitional provisions that were described by the Secretary of State in his opening speech.
I have the figures for Lambeth in rough form. The uniform rate for the country will be 119p. Lambeth's actual rate will be in the region of 150p. When we apply the Government's formula, Lambeth's notional rate will be 200p in the £ which is an excess of a little over 80p on the Government's standard rate. As

I understand it, that makes Lambeth a borough that would be liable for what I call a penalty and what the Secretary of State calls the transitional provisions.
I would like an answer to this question: is Lambeth on the list? Lambeth has made it quite clear, as it is legally, democratically and politically entitled to do, that it will defy Government policies. That is what politics are all about. Lambeth is entitled to go to its electorate, as it did, to get a political programme that is in direct opposition to the Government's.
Lambeth is proudly guilty of its defiance. I suppose the Lambeth council rate poundage will be in excess of the Government's uniform rate poundage, and I believe that it is entitled to an answer before the rate decisions are made in the weeks approaching 1 April. I believe that Lambeth is entitled to know from the Secretary of State, or the Minister of State, whether, on present assumptions, it is on his list. I can assure the Minister that Lambeth has not been influenced by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and has come to its own decision. But perhaps the Minister can tell us whether Lambeth is a candidate for the powers that he proposes to exercise in November this year.
The Government have put boroughs such as Lambeth in a difficult position. Such boroughs have been presented with three choices or, perhaps, a combination of choices. They have the choice of the bankruptcy of the council, the bankruptcy of local services, in the sense that they will have to be cut back to a significant extent, or possibly the bankruptcy of some ratepayers if there is to be a rate rise of the dimensions that are under discussion and in draft form at present.
In addition to that, the Government are forcing authorities such as Lambeth not merely into a state of defiance of and disagreement with the Government but into a form of rebellion. I was not elected to Parliament to cause the bankruptcy of my ratepayers or of my local services. I was elected to rebel against a system that compels people to continue to live in rotten housing conditions, sometimes having waited for a quarter of a century on a housing list.
I warn the Government that, unless they change their mind about the amount


of resources that are to go to a borough such as mine, they are not merely creating hardship in terms of a cut in services or of a rise in rates; they are placing strains on society, on councillors and on those interested in politics and local affairs which tempt people to go beyond the law.
I hope that I shall have an answer to the question whether Lambeth is on the list and that we shall have an indication that, even at this point, the Government will think again about the effect of these orders on the borough of Lambeth in the forthcoming months.

Mr. John Townend: We must look at this rate support grant settlement in the context of present economic circumstances. Having listened with interest to the way in which the right hon. Member for Birmingham, Spark-brook (Mr. Hattersley) prepared himself for the interventions that eventually arose, I was surprised at his audacity in blaming the economic situation purely on the present Government.
It seems incredible that the right hon. Gentleman has forgotten what happened last winter, when the previous Government's incomes policy was destroyed in a welter of industrial disputes and near anarchy in industry. The right hon. Gentleman has possibly overlooked the public expenditure plans to increase spending by £3,500 million, equal to 8p in the pound income tax, with no provision for where the money would come from. He seemed to ignore his right hon. Friend the Member for Leeds, East (Mr. Healey), who admitted that public sector borrowing was £1½ million in excess of what he had planned.
With a problem such as we have in this country, where the gross domestic product is likely to go down rather than up, it must be that it is not so much the fault of this Government as the fault of strikes, low productivity and over-manning. The right hon. Member for Sparkbrook would do more good by suggesting to his trade union friends that they should always ballot members of trade unions before there were strikes. That would do a lot to put up this country's growth.
I welcome this year's rate support grant settlement. I agree with the view ex-

pressed by the Association of County Councils that the settlement is as generous as could have been expected in the circumstances in maintaining a level of 61 per cent. Against the present economic backcloth, which is, without doubt, becoming worse, it is essential that we limit public expenditure. Indeed, many people who believe that to be true would feel that perhaps the Government have, if anything, been overgenerous in the rate support grant and that a settlement of 60 per cent. would have been more in keeping with the overall need to cut spending.
On the question of the distribution of grant, I must disagree with the hon. Member for Norwood (Mr. Fraser). I welcome the change, because the Secretary of State has brought to an end a tendency which has been continuing now for a considerable number of years, taking grant away from the shire counties. Since 1973–74 they have lost about 16 per cent. of their share of rate support grant. I therefore welcome the fact that this trend has been halted and, in a very small way, reversed. This year my own shire county of Humberside receives in real terms an extra £1 million.
That is an important change which is to be welcomed, since over the past decade we have seen more and more resources poured into the inner cities, into central area redevelopment and central area renovation, especially in areas represented by Opposition Members. These areas have had an increasing share of resources, but at the same time many people have been unaware of the needs of other parts of the country.
In this connection, I speak in particular of rural deprivation. It is a myth that everyone who lives in the countryside is wealthy, living in a large detached house and running two large cars. In fact, many of our country areas have poorer services. Many of them have a large number of residents on low incomes. Let us be honest: work in agriculture has always been low-paid compared with work in manufacturing. Country people have often had to travel further to work and incur higher travel costs. The same is true of heating costs, since in many rural areas people have not had the advantage of cheap North Sea gas which those in the big cities have enjoyed.

Mr. George Cunningham: While I accept the validity of the sort of points that the hon. Gentleman is now making, apart from the weight to be attached to them, may I put to him this question? There is one extra factor to be taken into consideration. What is the average cash payment per domestic hereditament in his county of Humberside? I am referring to the actual cash payment, not the rate in the pound or the rateable value but the average cash payment on rates per domestic hereditament.

Mr. Townend: I have to say frankly that I do not have that figure in my head. I shall certainly let the hon. Gentleman know in due course.

Mr. Cunningham: I know.

Mr. Townend: If the hon. Gentleman knows, he is better informed on that matter than I am. But I do not think that it is altogether relevant to the point that I am making that, whatever be the averages, within an average there are high and low, and a lot of people are not aware of the true extent of rural deprivation.
I turn now to the question of cash limits. I believe cash limits to be essential in local government if we are ever to bring common sense and control into public expenditure. Nevertheless, we should be frank and say that a cash limit of 13 per cent. will not prevent substantial increases in rates in many areas. I am convinced of that because it clearly does not take fully into account the existence and activities of the now famous—or perhaps I may say infamous—Professor Clegg and his comparability awards.
I can illustrate the size of the problem in my own area—I do have the figures for this example—by explaining what has happened in Humberside. When the Secretary of State last year asked all local authorities to reduce their budgets by 3 per cent.—the 1½ per cent. growth which has been allowed by the Labour Government and a further 1½ per cent.—Humberside loyally endeavoured to fulfil the Government's policy, and this required a reduction from its budget of about £5 million.
It is interesting to note the way things have gone in recent years, and I speak here having had many years' experience

in local government before I had the honour to be elected to the House. When the Labour Government got into financial difficulties and had to make substantial reductions in public expenditure at the time when they were under the control of the IMF, they naturally turned to local government. The significant difference between what happened then and what is happening now is that the vast majority of Conservative-controlled councils, and, indeed, the vast majority of Conservative opposition on councils with a Socialist majority, fully supported the then Government's policy to bring public expenditure under control, whereas today, sad to say, many Labour authorities do not put the national interest first in the same way.
As I have said, the amount which Humberside had to save to get within the Government's guidelines was £5 million, yet the amount which it is likely to have to find in the coming year for increased wages is 10 times that £5 million.
It has now been suggested in many quarters that the comparability award in respect of teachers is likely to be about 20 per cent. An additional cost at this level cannot be met within the 13 per cent. cash limit, and, equally, it will not be possible to meet it by a reduction in manning levels. I do not think that there is any suggestion that the number of teachers should be reduced as the increases given by the comparability study rise.
With the greatest respect to my right hon. Friend the Secretary of State and his colleagues, I believe that they made a crucial mistake on taking power last May, a mistake which has made the task of the local authorities far more difficult than it need have been. In my view, in the first Budget soon after the election, when the new Government were considering public expenditure, they should have forthwith abolished Professor Clegg and his team.
Not only have the professor and his colleagues played a not insignificant part in increasing Government spending and borrowing, but the whole basis of their comparability awards is suspect and, in the view of many, inflationary. This is particularly so, I suggest, where the comparability is set by productivity in the private sector. Furthermore, it appears


clear to me that the Standing Commission does not take adequate account of the value of inflation-proof pensions and job security in the public sector.
Some of the Clegg awards have been completely incomprehensible. I think, in particular, of last year's award for ancillary workers. It is generally accepted that the wages of cleaners and catering staff in the private sector are not higher than in the public sector—in fact, in many cases they are considerably lower—so that if there had been true comparability there would have been a reduction. I am not saying that there is no case for giving an uplift to these lower-paid workers in the private sector, but to increase wage rates in the public sector by a bogus comparability scheme is, in my view, just helping to twist the spiral of inflation.
I submit that the Government made that mistake, but there is always time to put it right and I ask my right hon. Friend to consult his colleagues at once so that this issue may be dealt with as a matter of urgency. Let the Standing Commission be abolished altogether or let its terms of reference and its personnel be changed.
I assure the Secretary of State that among the vast majority of local authorities he will receive complete support for what he is trying to do. Nevertheless, it is not in practice quite so easy to do it, and I think that it may be a little misleading to speak as we do of the number of employees in the local authority sector. During my period of office as a county council leader, my authority worked hard to reduce staffing levels. However, in getting the support of local authority leaders it would be helpful if certain facts were accepted unequivocally by the Government.
It should be recognised, for instance, that a considerable proportion of increased manning has been the direct result not of local government action but of central Government action. I draw to the attention of my right hon. Friend the Secretary of State the health and safety at work legislation. Of course, we are all in favour of health and safety. However, to the best of my knowledge, there has been no recorded death of a young school child by fire in a day school within the past decade. Despite that background,

hundreds of thousands, if not millions, of pounds have been spent on providing fire doors in schools that have been built to the highest level of safety. I am told that the number of children receiving injuries from fire doors has risen. Such factors should be considered.
Secondly, we are increasing expenditure on law and order. As we recruit more policemen, so expenditure increases. There has been a large increase in the number employed in the fire service. Responsibility for that increase lies to a great extent with the Labour Government, who interfered with the negotiations between local authorities and the union at the time of the firemen's strike. If ever there was an example of an issue being taken out of the hands of the local authorities by central Government, that was it. In trying to keep within their rigid pay policy, the Labour Government tried to cook the books. Instead of settling for one or two extra percentages in cash terms, they did a deal which, when costed a year later, was found to have cost local authorities an extra 30 per cent. That was an extremely expensive deal.
The raising of the school leaving age has to be taken into account. That action had the support of both sides of the House. However, in the view of many, including many in education, it has been a disaster. We now have to provide accommodation and teachers for many children who do not want to be at school and who cause disruption.
I welcome my right hon. Friend's undertaking to reduce statutory duties. I hope that he will continue the good work. There is scope for economies in manning. I ask hon. Members to remember that another factor has been the continuing reduction of working hours and a continuing increase in the length of holidays for local authority workers over the past decade. We read in the press that there is growing pressure for a further reduction in working hours. That will make it even more difficult to make staff economies.
I welcome the end of the multiple regression analysis. Despite numerous discussions with the county treasurer, I never really understood it. I always felt rather inferior, until I attended a meeting and was told that there were only about four people in the country who understood it.

Mr. John Fraser: Does the hon. Gentleman accept that the definition of multiple regression analysis is repeating in future the mistakes that have been made in the past?

Mr. Townend: I agree with the hon. Gentleman's definition, but I do not think that it enlightens my understanding of a complex subject.
It is important that we deal with profligate authorities. Although some of the changes will be welcomed by local authorities, there will be some serious reservations. I hope that my right hon. and hon. Friends will take careful note of the comments of local authority associations. They accept that there are advantages in having a standard rate of expenditure and in profligate authorities being penalised. However, they are afraid that another Government will be set on expanding public expenditure at a rate that is faster than that which a local authority wants to pursue in increasing its rates. They are afraid that local authorities that "underspend" may be penalised.
We are to have a new capital framework. There is a real fear that there will be practical difficulties because the capital allocations are to be based on expenditure rather than on loan sanctions. We all know of the delays that can arise. The new system could increase public sector borrowing. There would be less inclination for local authorities to finance by other methods—for example, out of revenue or by leasing. The need for the changes is accepted, but there are worries and doubts. It is up to Ministers to try to overcome the problems by discussing them with local authorities. I support the rate support grant settlement. All in all, it is a fair one.

Mr. George Cunningham: The hon. Member for Bridlington (Mr. Townend) made two confessions I read in "Dod's" that he is a chartered accountant. However, he never got to understand regression analysis. I accept that the regression analysis device is not the easiest thing in the world, but nor is it something that ought to baffle in the end a person who is simultaneously a chartered accountant and the chairman of a largish local auth-

ority. I think there is something bad about that.
Secondly, the hon. Gentleman confessed that, despite those two positions, he is at the moment unaware of what the average rate payments in his area are, which I must say astonishes me. The average rate payments in my borough of Islington are £255 a year, just under £5 per week per domestic ratepayer. I do not think that he should be permitted to stay in his state of uncertainty for longer than is necessary.

Mr. John Townend: Mr. John Townend rose—

Mr. Cunningham: Perhaps when the hon. Gentleman intervenes—in addition to saying whatever he is going to say—he will have a guess at what the average rate payments in his area of Humberside are.

Mr.Townend: Part of my professional training was never to guess. That is why I did not make the mistake that the hon. Gentleman hoped that I would make. As I did not have the figures in front of me, I did not guess. He was hoping that I would guess. He had the figures in front of him, and he would have been able to shoot me down.

Mr. Cunningham: I am just hoping to show that the hon. Gentleman does not know the answer.

Mr. Townend: Iintended to be honest to the House. I never indicated that I had the figures in my head. I admitted that I did not know them offhand. It is most unfair for the hon. Gentleman to say that I tried to imply that I had the answer in my head.

Mr. Cunningham: I did not suggest any such thing. It is perfectly clear that the last place that the answer is in is the hon. Gentleman's head. Here are the figures anyway. In Humberside the average for the rural districts is £101·65. That is for both the averages given in the normal publication on the subject. That is for all districts and the county area total. There are districts, for example, which go as low as £85 a year. The highest is £128 a year. That is, on average, just under £2 a week, and the very highest is less than £2·50 a week. That is not the be-all and end-all, the only relevant consideration, that we are discussing at the moment.
But when the hon. Gentleman says that he welcomes the shift of central Government funds from areas like Lambeth and Islington, and inner city areas throughout the country, to areas like his, my God, he must explain how it is that more funds should be shifter to areas where the average domestic ratepayer is paying less than £2 a week and taken away from areas where the average domestic ratepayer is paying about £5 a week.
I hope that the hon. Gentleman bears in mind that my hon. Friend the Member for Norwood (Mr. Fraser) and myself do not represent Mayfair. My constituents, who are paying an average of £5 a week in rates, are, very many of them, living in council flats—not in council houses with gardens, but often in tower blocks. They are paying, nevertheless, enormous rates of that size for very, very imperfect accommodation. That says something not only about the distribution of central Government finance but also about the entire rating system. The time is long overdue for a Committee of the House—an obvious body would be a Select Committee covering the Department of the Environment—to make an investigation into the rating system and highlight the inequalities of which so many hon. Members, not only the hon. Member for Bridlington, remain unaware.

Mr. Pawsey: I agree with the hon. Gentleman's last sentiments, when he calls for a Select Committee to examine rating. However, does he accept that in many rural areas there are what used to be termed rural slums? There are many low-paid farm workers in such areas. Does the hon. Gentleman accept that those workers do not necessarily earn as much as those in inner cities? Surely, that is reflected to some extent in valuations of property and in the amount of rates that people can afford to pay.

Mr. Cunningham: Absolutely. If the hon. Gentleman joins me in trying to persuade Ministers that the level of income in an area should be relevant to the determination of the distribution of rate support grant, he will find that he is up against a brick wall. There was more validity in the point made by his hon. Friend the Member for Bridlington that

there are special and expensive costs lying upon the local authorities in rural areas but that the costs lying upon local authorities in city areas are even greater, costs that are different and certainly more onerous.
Rates are supposed to be an expenditure tax—a tax upon the amount of money that is expended upon housing, whether in the form of a capital sum, mortgage repayments or rent. It is normal when revising an expenditure tax to express it as a percentage of the thing on which it is a tax. Value added tax stands at the rate of 15 per cent., thus enabling people to see the original amount that they would have spent had VAT not been added. Rates in many parts of the country—my constituency is a prime illustration—are rising to a level where they are becoming a 100 per cent. tax on actual paid rent. A typical three-bedroomed flat in my constituency might have a rent of £8·64 a week. The rates on that flat would be £6·51. Subject to approval by the full council, Islington will be raising its rents next year by about 15 per cent. The rates seem inescapably bound to rise by about 40 per cent. The result is that I expect next year's rates to be about 90 per cent. of rent. As an expenditure tax, it is monstrously too onerous. Something must be done about it.
By contrast, many people living in other parts of the country pay rates which constitute only a tiny fraction of the amount that they expend on rent, mortgage repayments or the equivalent in a capital sum. As a tax on expenditure on housing, rates are a monstrosity.
As an aside, if we were looking for forms of expenditure which should be taken away from rates I believe that we should look carefully at expenditure on the police. In part of the United Kingdom there is a system whereby the cost of the police is not borne by local rates. In Northern Ireland the cost of the police force is borne by central Government. It is iniquitous that that should be the system in one part of the country and not in the rest. In my view, it is in the nature of the police force that its costs are better borne by national finance and not by local authority finance.
The Secretary of State proposes to remove to a considerable extent any real


local autonomy in the rating and expenditure sector. Local authorities, including my own, are intensely concerned about the matter. My local authority is trying to make up its mind what to do about it for the year 1980–81. Local authorities are faced with the possibility of breaching an unknown offence with a penalty of an unknown nature hanging over their heads. All they know is that, if the Secretary of State's words are not to be belied entirely, he has to find somebody to shoot at the end of the day. He is really saying to all local authorities "Race around the field, and one thing that you can be sure about is that the last man in will get it in the neck." Perhaps it will be only the last authority that suffers. I suspect that that last one might well be Lambeth. Perhaps it will be the last half a dozen.
That is the full extent of the certainty that local authorities have about the matter. A hostage has to be shot pour encourager les autres. That is wrong. As my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said, if the Labour Government had done that they would have been crucified. If we had brought forward proposals of that nature we would have been told that Ministers were lecturing local authorities, were thinking that they were gods and not bothering to pass legislation which told local authorities where they stood. We would have been accused of passing legislation that made the authorities adhere to what we wanted, under the threat that we would later pass legislation that would clobber them. Not only would the Conservative Party have been giving us hell for that in the House, but practically every newspaper in the country would have done the same.
Indeed, the newspapers in the country should be picking up this point because the essence of democracy is involved in saying to local authorities "You will face a penalty for an offence we have not defined, a penalty of an unknown nature. We do not even tell you when it will be applied and we do not tell you how you need to behave in order to avoid it." That belies all that was said in the previous Parliament by the Conservatives about setting free local authorities.
The Secretary of State made a big point of saying that the present system of rate support grant hands money over to those who spend the most. We all recognise the limited sense in which that is right. It is a fault in the present system, but he is wrong to put the matter as baldly as that. If we imagine two local authorities with identical characteristics, so far as the needs element is concerned, and one proceeds to spend a lot while the other spends less, the one that spends a lot will not thereby attract more RSG than the other. The system works in general and not with reference to individual authorities and their individual actions. Under the present arrangements, local authorities have every incentive to save money individually, even though there is a built-in arrangement whereby, if a certain group of local authorities with similar characteristics tends to spend more, the system assumes that it is spending more because the authorities have needs justifying that expenditure.
That brings me to the system that is to be put in its place. The Secretary of States does not know what he will put in its place. He says that he does not like the present system. It is always a mistake to take a feature of the present system and say that one does not like it and that at some time in the future something better will be found. The right hon. Gentleman gave no positive indication today of what he would find in the future that would be a better system. He told the House only of the bad characteristics of the present system as he saw them. Therefore, we can have no faith in his future ability to devise a better system. What we can say is that it cannot be simple. Local authorities are too complex and too different for any simple system remotely to begin to accommodate their needs.
We will get a new basic system and year after year Ministers will find a flaw with it, and they will add another characteristic and another, and so on. Ultimately, we will end up with something that is just as complicated as that which we have now. We will go through the whole weary round again. Someone will say that he does not like it and we will start again. It is always best to find a replacement before getting rid of the present system.
I wish to put one specific point on London rates to the Minister who is to reply, but neither he nor the Secretary of State is here. That is great. We have been told that the arrangements for London will provide a formula to convert the notional universal rate into something different, by pretending that London's rateable resources are the same as those in the rest of the country. I am aware that the content of the formula is more complex than that. However, at present local authority wages constitute a very large part of local authority expenditure. In London those wages are inflated by London weighting, which currently stands at about £750 per person. The average local authority wage is probably about £6,000 or £7,000 and, therefore, London weighting must constitute 10 per cent. or more of the wages bill. The present arrangements do not appear to take that into account, because that can be taken into account in the claw-back arrangement that otherwise applies.
If we are to have a formula that pretends that London has the rateable resources of the rest of Britain and not the higher rateable resources that it has, we must build into that formula a device that takes account of the fact that local authority wage bills in London are bound to be 10 per cent. higher for the same gradings and number of people. I hope that the Minister will answer my point.
The Secretary of State said that part of the explanation for the arrangements concerning London was that the Government were informed that wages in London had not gone up as much as in the rest of the country. I cannot believe that that applies to local authority wages, because local authority wages are determined upon a national basis, subject only to London weighting and a few other qualifications. Surely the cost of wages in London is just as high as those in the rest of Britain, if not higher. If the Secretary of State's statement meant anything, it meant that other wages in London had not gone up as much, and, therefore, it is not the expenditure of local authorities that has gone up less but the wages of those who are paying for that expenditure. That is a reason not for clobbering London but for doing the opposite. London bears as much expenditure as other local authorities, yet

it has less income resources upon which to base it.
The House of Commons works only—when it rarely works—when Government Members, in whom parliamentary democracy lies in trust, follow their own judgment rather than do what they are told. I believe that many Conservative Members who have consulted their local authorities and local authority associations about the proposals have severe reservations about these proposals and their effect on local autonomy. I hope that Conservative Members will consult their local authorities and local authority associations and that, as a result, they will do whatever is necessary to make sure that the encroachment upon local authority by national Government does not take place.

Mr. J. F. Pawsey: I particularly welcome the rate support grant proposals as they relate to shire counties. Under the previous Labour Government, shire counties suffered extensively. The previous Government put their money where they believed their votes to be, and they paid little attention to the specific problems of county councils. They are problems of distance, of road construction and maintenance, of rural schools and of the transport of children to those schools. Those problems are specific to shire counties, and they were not taken into account by the Labour Government when they set rate support grant settlements.
The settlements of the last five years were basically political settlements, and during that period the rate support grant was cynically used in an attempt to buy votes with money moved from shire counties to, for example, metropolitan counties.
I have welcomed the rate support grant, yet I do so with some reservations. There is very little improvement for the shire counties, and that improvement represents only 0·7 per cent. over the expected 1979–80 figure. That is not enough to remedy the problem that counties have experienced in the last five years. The shire counties' share of the needs grant fell from 62·6per cent in 1973–74 to 51·6 per cent. in 1979–80. That is a fall of 16 per cent. despite a marked growth in population within the shire counties.
I shall quote from a letter dated 17 December which I received from the chief


executive of Warwickshire county council. He said:
The settlement generally protects the shire counties from the further loss of needs element expected under the previous Government's distribution policy but does little to reverse the cumulative losses suffered by the non-metropolitan areas (for Warwickshire probably as much as £15 million per annum).
One fairly small shire county has suffered a swingeing loss, and that loss is not made up by the current proposals. My right hon. Friend the Secretary of State has not taken enough account of the difficulties that shire counties experience.
I am concerned also about the operation of cash limits. At best those limits can be described as a somewhat blunt instrument. That instrument will particularly affect the authorities which obeyed Government demands to cut expenditure during the past five years or more. The authorities which were good little boys, which listened to what the Government said and obeyed the dictates, will now suffer because they have little or no fat to cut out. They use Government spending plans as a basis for their budgets.
Although it may not be the Government's intention, those authorities will effectively be penalised. I accept the need to reduce Government spending and borrowing, and I also accept that local government must bear its fair share of any economies that need to be made. Local government must play its part in that policy. Although I accept that there have been spendthrift local authorities—and I expect that the Minister will mention those councils which have been spending money almost as if it were going out of fashion—it is unfortunate that the responsible counties will be penalised because of that.
I am also concerned that some of the growth in local government bureaucracy has been due to legislation from this House. Not all of the growth in local government has been due to empire building in the town hall, and there I welcome the Government's proposals to reduce the controls imposed on local government.
I have had experience as a member of a parish council, of a rural district council, of a borough council and of a county council. I do not pretend that they were perfect, but, equally, there was not a great deal of waste. Economies have been made, but further economies can be made only

at the expense of services. It is a paradox that as services decline rates will increase, and that is due to the economic situation that the Government have inherited. The problems that the Government are experiencing, particularly with lack of growth, are underlining the difficulties that will increasingly be faced by local government.
I believe that the first turn in the upward spiral of rates came with the reform of local government in 1973–74, and I take no pleasure in the fact that my party was responsible for introducing that reform, which turned out to be an absolute and unparalleled disaster for local government. It was expensive and we gained the worst of all possible worlds, although I accept that some reorganisation was necessary. My experience over 21 years in local government clearly underlines that, but we threw the baby out with the bath water.
Reform of local government occurred at a time when the philosophy was "biggest is best". Mergers and changes made local government much more remote from the people that it was representing. When the rural district and urban district councils were abolished, the number of councillors was reduced, which removed from local government the intimate knowledge that the majority of them had of the areas that they were administering. In the rural district of which I was a member, we had 49 members to administer about 50 parishes and parish meetings, and a councillor was able to discuss the problems of an individual council tenant, which demonstrates the degree of knowledge that local councillors were able to bring to local government. That has all been lost.
The reforms have tried to replace that intimate knowledge with a growth in bureaucracy, and more staff have been recruited. What was done by a voluntary local councillor is now done by a paid officer, which again has resulted in greater expenditure.
I should like to offer a word of advice to my right hon. Friend. Disquiet is being caused to local authorities by information being released by his Department, not by circulars but directly to the press. Authorities have been in touch with me to say that they very much resent the fact that they read in the press of changes


and proposals that will affect their authority before they actually receive formal notification. I appreciate that my right hon. Friend and his Department came to office with the declared intention of reducing the number of circulars, but I ask him to consider whether we have taken such measures too literally.
Local authorities have criticised the block grant system, which they believe does not deal with the difficulties of properly assessing the spending needs of about 456 local authorities. I do not pretend that I know the answers, and the old method of assessing rate support grant was cumbersome and extremely complicated, but these problems may, perhaps, give a new impetus to trying to find a new and fairer method of financing local government. Rates and grants are clumsy and unfair.
My hon. Friend the Member for Luton, East (Mr. Bright) criticised the method of financing local government and the rating system in general, and I support him in that. I hope that we shall find time to consider in the busy timetable of this Parliament a new and fairer method of financing local government.

Mr. David Alton: I listened with interest to the speeches of the hon. Members for Norwood (Mr. Fraser) and Islington, South and Finsbury (Mr. Cunningham) about the sorry state of affairs in their constituencies. The hon. Member for Norwood talked about potential rate increases of up to 56 per cent., and in Liverpool I suspect that they could increase by as much as 40 per cent. this year, which will come as a body blow to ratepayers who are facing many other increases. As the Secretary of State said, council tenants will face average increases in their rents of £1·50 a week as well as the rate increases.
In a sense, local government is being made to do the Government's dirty work and local authorities are being left to find a great deal of money to combat the inflation caused by the policies of this Government and the previous one. Local authorities are expected to find money solely from their own resources and many will be severely financially squeezed.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) told

the Secretary of State for the Environment that many of us do not accept the economic premises on which the Government are working. I assure the Minister of State that on the Liberal Benches we are also worried about the Government's over-reaction to its predecessors' policies. They criticise the previous Government for their wet-nurse approach, for applying poultices to problems and hoping that by throwing money at them they will go away, but in their over-reaction they are stripping the patient's dressings from his wounds, the wet nurse has been sacked and the hospital closed.
The result will be that services will be far lower than in the past. Unfortunately, cuts in local government expenditure do not necessarily reflect a reduction in bureaucracy. Administrators are inclined to cut services rather than administrators, and I suspect that that scenario will be played out again this year.
I told the Secretary of State earlier that thrift has not paid off. Local authorities that have tried to be prudent and frugal have found that they will be particularly hard hit during the 12 months ahead. Those authorities with money to spare and fat to cut will be able to make savings by reducing grandiose or pie-in-the-sky schemes, but those that have applied the Government's guidelines over the past five years will be in a much more difficult position.
From speeches from the Government Benches, one would imagine that there had not been public expenditure cuts during the previous Administration. In fact, year after year local government has been asked to meet reduced standards and spending targets, ever since a former Labour Secretary of State told us that the party was over and that local government had to reduce spending. Many local authorities did so, trying to cut out waste where they could by establishing performance review and financial control sub-committees, searching out waste and making savings. I believe that that is the right way of reducing public expenditure rather than by going about it with an axe or hacksaw and cutting without minding the consequences.
It would be far better if the Secretary of State turned his attention to local authorities such as South Oxford shire, in his own constituency, where the local


authority in Crow marsh has decided to spend £5 million on building new council offices. Many of us would say that that sort of expenditure at this time was a gross waste of local ratepayers' money.
In Southwark, the local authority anticipated expenditure of many millions of pounds on new council offices. Southwark is a good example of an authority that has now decided not to go ahead because of the new financial climate. Thus, it will save money and it may well be able to protect some of its basic services as a result. But what happens in cities such as Liverpool, which has been a shining example to many other authorities in the past? On one occasion it actually reduced rates without cutting services. Both of those authorities will now have to cut into the flesh of their basic services. It will mean that meals on wheels, home helps, school meals, school transport services, street sweepers, basic environmental services, housing and building programmes will have to be reduced.
Conservative Members have spoken of economy measures such as abandoning the provision of fire doors in nursery schools. The Conservative-controlled Association of County Councils has also suggested that fire doors and fire safety schemes might be eliminated from old people's homes and that the nutriment in school meals might be reduced as a means of saving money. That is way beyond the point of reason, and such excesses bring national Government into disrepute in terms of their dealings with local government.
We have heard a great deal about the shift of rate support grant from the urban areas to the shire counties. Anyone would think that suddenly, overnight, the shire counties would be that much better off, but the fact is that all ratepayers throughout the United Kingdom this year will face massive increases imposed on them by the bankrupt policies of this Government. Anyone would think that the shire counties were about to have a reduction in their rates. That is not so. All that will happen is that one group of ratepayers will be set against another. The Secretary of State has tried to disguise the basic fact that rates throughout the country will increase and that

many people will suffer undue hardship as a result. The mask is beginning to slip.
As the right hon. Member for Spark-brook said, the reason for these policies is to pay for the Government's reductions in taxation. We have seen the benefits from those. They give advantage to people at the top end of the income scale and those who have inherited wealth. But the vulnerable, the weak, and the poor—those who are most at risk in our society—invariably are those who will suffer.
Inevitably, this rate support grant settlement undermines the autonomy of local government—a point that has been mentioned several times today. Like the Housing Bill, which we discussed yesterday afternoon, this Bill takes away the right of local government to decide its own fortunes in future. Local councils which have been elected on a platform of increasing services, with the implication that that inevitably has for increased rates, of selling council houses or not, of implementing comprehensive systems of education or not, will find that their right to take such decisions is being eroded by the shift towards more and more centralisation in government.
One remembers the promises that were made in the Conservative manifesto at the last election. The Tories talked about greater decentralisation and a shift of power back to local government. They talked about giving local authorities greater control over their own affairs. Indeed, the Secretary of State made great play with these points during the election campaign.

Mr. Heddle: Much has been said in the debate so far about local autonomy. Surely the unitary grant principle will retain local antonomy in principle, because it will give local authorities the opportunity to decide their own priorities.

Mr. Alton: Not for the first time, the hon. Member is proceeding in the wrong direction. The unitary grant principle is one that the local authorities themselves, when consulted, rejected. The new block grant system, which is outlined in paragraphs 38 to 41, has been criticised by the Association of Metropolitan Authorities. This quote from that body answers the question raised earlier by the Secretary of


State about consulting local authorities on the new unitary system. It said:
The proposal does not appear to differ substantially in theory from the former Government's proposed Unitary Grant system. The block grant system depends on the assessment by central Government of a standard expenditure figure for each local authority and the calculation of a standard rate poundage for each class of authority (e.g. metropolitan districts). The Report envisages that Government would incorporate in the schedule of rate poundage a threshold above the standard expenditure level so that if individual local authorities spent beyond that level they would receive a progressively reducing rate of Government grant. The Association opposes this proposal in principle and doubts whether in practice Government could devise a system which is both fair and efficient. The issue of principle is at the centre of the debate on central, local relationships. Local authorities have always recognised central Government's role in macro-economic policy. But while recognising central Government's role, local authorities are independently elected autonomous bodies, directly accountable to their electorates. Given the good record of local government in meeting the public expenditure policies of successive Governments, the Association considers that the block grant proposal, which would increase central control, is unnecessary and would, if implemented, seriously erode the autonomy of local government.
Those are the views of the Conservative-controlled Association of Metropolitan Authorities. Not only are these interim measures unsatisfactory; the long-term proposals are equally ill founded.
I believe that there is a need for a total reform of the rating system. We surely all agree that the local tax base is suspect. The last revaluation was in 1973 and even that was highly unsatisfactory. The next would have been in 1982, but without any reference to the Association of Metropolitan Authorities or the local councils the Secretary of State decided to abandon the rating revaluation at the drop of a hat. Subsequently he had to apologise to the local authorities for his failure to consult them. That behaviour is very much a hallmark of the way in which the Secretary of State has conducted his affairs since taking up his present position.
The rating system must be based not on arbitrary notional values but on an ability to pay. It should be based on the income of the person living in the property. A classic example of the present inadequate system is the water rate. An elderly lady living alone can occupy a house alongside a family containing two or three wage earners. They pay the same water rate. Yet the family will be consuming much more water than the elderly lady living alone. The rating system, to be fair, should be reorganised on a basis of ability to pay.
I turn now to the question of punishment. The Secretary of State talked a great deal about the punitive measures that he would introduce to penalise local authorities that failed to comply with the rate support grant settlement. There is already sufficient uncertainty facing every one of the 456 local authorities in England and Wales. These bully-boy tactics, or blackmail, simply increase that uncertainty.
The Secretary of State said that local authorities should, if necessary, sack employees. I do not believe that such action will bring any savings for the public purse. It simply means that qualified people will have to be paid unemployment and social security benefits. It will add to the number of people on the scrap heap of unemployment. It will increase hardship and add to the social problems that the country already faces. That sort of approach will not solve any problems.
The way to reduce waste in local government is to look systematically at every line of expenditure, searching out abuses and waste, dealing with excesses, where and when they arise, consulting sensitively with the authorities and their representative organisations, and endeavouring to reform the rating system so that it is fair and equitable. Until the Government are prepared to bring forward radical and far-reaching proposals, I believe that we should continue to operate the present system.

Mr. John Heddle (Lichfield and Tam-worth): I speak as a Member of this House and also as a member of one of the larger county authorities. In view of the time and the fact that about six hon. Members still wish to speak, I intend to keep my remarks short.
I should like to ask the right hon. Member for Widnes (Mr. Oakes), who will wind up for the Opposition, two questions. Is it true that as far back as May 1977 the Government in which he was a Minister acknowledged the need for reform of the grant system and that a Green Paper, Cmnd. 6813, proposed that the unitary grant, suggested by the Lay-field committee, should be adopted? Although that Government remained in office for a further two years, they failed to implement the grant system.
I also invite the right hon. Gentleman to agree with me, and therefore to disagree with his right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), who said that there were only three options open to local government, that there is a fourth. The first is to reduce services, the second to increase unemployment, and the third to increase rates. The fourth, I suggest, is to cut out waste that every hon. Member knows still exists within most local authorities.
I agree wholeheartedly with those hon. Members on both sides, particularly the hon. Member for Islington, South and Finsbury (Mr. Cunningham), who proposed that there should be reform of the rating system but that such reform should not take place until a realistic alternative had been found. I agree that the search for that realistic alternative could be one of the responsibilities of the new Select Committee on the Environment.
I also agree wholeheartedly with, and would like to be associated with, the remarks of my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) in thanking the Government for the consideration given to Stafford shire in its rate support grant settlement. I fear, however, as my hon. Friend the Member for Bridlington (Mr. Townend) said, that the increase in grant will be negated to a certain extent by the possible

recommendations of Professor Clegg. Stafford shire, along with many shire counties, has made a concerted effort to keep within the Government's guidelines. If the Clegg settlement on teachers' salaries is, as expected, in the region of 20 per cent., Staffordshire and many other reluctant shire counties will be forced to increase rates.
I should like to welcome the stability in the settlement that the Government have provided. I am sure that my right hon. Friend will concede that any attempt to vary significantly the calculation and the distribution of the settlement would have been unfortunate, particularly at a time of considerable economic uncertainty coupled with significant and necessary reductions in local government expenditure. I am sure that this will be endorsed by all hon. Members. The retention of the overall grant level of 61 per cent. must therefore be most welcome in local government circles.
I am particularly pleased, too, that the Government have sought an early opportunity to halt the drift in the allocation of grant from the shire counties to the inner city areas. I am acutely aware of the needs of the cities, particularly in regard to population drift away from the inner areas. I have noted in Birmingham, which is but 12 miles from my own West Midlands constituency, the difficulties that arise from inner city blight problems. Whilst recognising the problem, as do many of our colleagues in local government, I feel that any central Government financial assistance to tackle the problem should be made available in addition to, and not as part of, the normal rate support grant finance.
I appreciate that my right hon. Friend has frozen the formula for the distribution of the 1980–81 grant on the previous year's basis. However, this does not mean that all recipients of grant will receive the same share of the total as they did last year, because changes have been made in the data used for the calculations. It is perhaps singularly unfortunate that some of the data are particularly volatile. I refer particularly to the labour cost index data. Perhaps my right hon. Friend who winds up the debate for the Government will touch upon this.
Whilst applauding the stability in the present grant proposals for 1980–81, all hon. Members must surely agree that at the very centre of the grant distribution proposals there is the thorny question of the assessment of needs of individual areas. Attempts to quantify these needs have in the past been related to levels of expenditure incurred in the various areas. That is a very rough guide, particularly when such expenditure levels can hide factors varying considerably between areas.
The question of the assessment of need has taxed the minds of many people over the years. I think it fair to say that the present arrangements are no more than a compromise—a compromise needed because of the many and varied, and often conflicting, demands made by various types of councils in respect of services with widely different impacts upon the population.
This problem will not go away when the House considers the proposed changes for 1981–82. The consultation papers thus far produced still indicate that the thorny question of the assessment of needs remains at the heart of the new proposals. I trust that every effort will be made by those charged with the technical tasks of the new proposals to measure this need more realistically than has been possible. I am particularly pleased to hear from my right hon. Friend the Secretary of State that full consultation will continue to take place with the local authority associations in an endeavour to improve a long discredited basis.
My final comments concern the cash limits, about which we have heard so much in today's debate, which my right hon. Friend included within the settlement for inflation in respect of both pay and prices expected in the year in question. I believe that it is absolutely right that the inclusion of those cash limits should be seen as a fundamental part of the Government's overall fight against the ravages of inflation, the symptoms of which we inherited from the last Government. No Government, however incompetent—this Government are the epitome of competence and good housekeeping—could possibly have been party and handmaiden to an increase in inflation from 10 per per cent. to 16 per cent. or 17 per cent. within six months. Inflation, like an

ocean liner, takes a long time to turn round.

Mr. Alton: I am glad that the hon. Gentleman mentioned the rate of inflation. Perhaps he will explain why it is now standing at 18 per cent.

Mr. Heddle: As I have just said, inflation takes at least six months to work through the system. The right hon. Member for Leeds, East (Mr. Healey) said that it took 18 months. He has far more experience than many others of producing 14 or 15 Budgets within four or five years. It certainly takes more than six months for inflation to come through the system. Therefore, this Government cannot be held responsible in any way for the present inflation figure.
With the support of the Opposition and their friends in the trade union movement in exercising wage restraint, the nation can bring inflation down to an all-time low, which will remain static for years to come, provided that in both central and local government we practise prudent finance and good housekeeping.

Mr. A. P. Costain: Does not my hon. Friend find the remarks of the hon. Member for Liverpool, Edge Hill (Mr. Alton), who is a member of the party which kept the last Government in power through the Lib-Lab alliance, somewhat repulsive? The hon. Member tries to blame the Conservatives for the inflation caused by the party which was kept in power by the Liberals.

Mr. Heddle: I am obliged to my hon. Friend the Member for Folkestone and Hythe (Mr. Costain). I have great regard for his long experience in the House, and as an inexperienced Member I would not venture to disagree with him on that issue. The Conservative Party is committed to controlling the modern dinosaur of inflation. If our country is once more to become great, prosperous and profitable, it is vital that the proportion of the gross national product taken up by public expenditure—at central and local levels—is at worst contained and at best reduced.
It is essential, therefore, that wage and salary negotiations now in the pipeline should be pursued—while recognising our present dire circumstances—with a refreshing degree of realism. As a nation, we cannot continue to pay ourselves more


than we earn. We cannot continue to pay ourselves more from profits that are not there. Those profits are not there because we are not producing the wealth that comes from greater productivity. However, given the time and the will, we can do that. Both central and local government must set an example to our people.

Mr. Allan Roberts: In the general context of our discussion of the rate support grant, I shall speak of the background against which the settlement of the rate has been reached and relate the circumstances in the Sefton metropolitan district council area to the general factors relevant to the rate support grant.
Inner city areas are currently suffering as a result of the Government's economic policies, to an extent such that I question the future of local government itself. The present rate support grant proposals are symptomatic of the Government's approach to local government. The Government are mounting an attack on the fundamentals of local democracy.
I am surprised that members of the Tory Party, both in the House and in the country, should allow the Secretary of State for the Environment and his colleagues to get away with a major attack on local government. When local government—that is, the grass roots of the local political parties to which people belong in order to take an active part in deciding the issues affecting their lives—is attacked, the very basis of British democracy is attacked.
Great strides in social progress have been made in this country in recent times. For example, better living conditions have been provided for our people by local government. I have never known a Government, of whatever political persuasion, to give power to local government rather than take it away. Labour Governments have fallen into the trap laid by civil servants and have introduced legislation to take powers away from local government. The responsibility to care for the health of our citizens has been taken away from local government and placed in the hands of non-elected bodies. Even the gas industry, which began as part of local government, has been removed from the control of local government.
No previous Government have so obviously, purposefully and blatantly set

out to destroy the basis of local democracy. The rate support grant settlement and the Secretary of State's statement on 16 November lay bare the Government's philosophy. The Government obviously believe not in democracy but in dictatorship from Whitehall.
The settlement comes on top of decisions which have already been taken by the present Government. In the Budget, the Government cut the rate support grant by £300 million for the year 1979–80. This year the Government have taken about £310 million from local government. Local authorities have had a dramatic reduction in the moneys which they expected to receive and which were promised by the Labour Government.
Liverpool lost £3½ million at a stroke, although it was expecting to receive that sum and had budgeted for it. That loss took place before the current rate support grant settlement. The Secretary of State for the Environment pretends that this is a 61 per cent. settlement and not really a cut in what was promised by the previous Government. In reality, the Secretary of State is reducing the money available to local authorities way below that figure. The Government have refused to accept as relevant expenditure many items which were previously acceptable. The Government have limited the items on which local authorities can spend money on the basis of receiving a central Government contribution.
The settlement is based on a 13 per cent. rate of inflation. It is likely to be more than 20 per cent. If Ministers continue to make statements such as that made today about gas prices, the rate of inflation is likely to soar way beyond 20 per cent. The rate of inflation on which the settlement is based in unrealistic and will result in a massive cut in the rate support grant.
The Government are mounting an attack on the cities, the metropolitan areas and the areas in the greatest stress. That attack has only just begun. We are experiencing only the beginning of the shift of resources from the areas of greatest need to the shire counties. During the Labour Party's period in office, there was a gradual shift in the distribution of rate support grant in favour of the needy inner urban areas. In the last five years London's share of needs element increased from 17½ per cent. to 22 per cent. The


metropolitan districts' share increased from 25 per cent. to 26½ per cent. I accept that the reversal contained in the current settlement is not great, but the process has begun and I have no doubt that it will continue.
Rural deprivation has been mentioned. Government Members have bemoaned the fact that money goes to the areas of greatest need. They even dispute that places such as Liverpool, Bootle and Manchester have worse problems than Shropshire, Cheshire and Wiltshire. The figures demonstrate a clear need for even more redistribution in favour of the urban and inner city areas. For example, there are 121 persons per 1,000 of the population living in houses lacking basic amenities in the shire counties. The figure for Liverpool is 288, for Manchester 268, and Birmingham 194. Unemployment in the shire counties is running at 23 per 1,000 of the population. In Manchester the figure is 46 and in Liverpool 71. In the face of those figures, the Government dare to suggest that the shire counties are in greater need than the inner cities. In the shire counties there are 10 lone-parent families per 1,000 of the population. For Liverpool the figure is 16 and for Manchester 22.
We come next to the amount that is paid in rates. In spite of the Labour Government's redistribution under the rate support grant in favour of the inner city and urban areas, the citizens of those areas still pay fantastically higher rate bills than people living in shire counties. The average rate bill in 1979–80 for standard domestic properties in Wiltshire was £138. In Gates head the figure was £159 and in Hackney £358.
One of the worst aspects of the current rate support grant and the Secretary of State's statement is the threat being held over the heads of local government about what will happen if they do not do what the right hon. Gentleman wants and keep their rates lower than is necessary to provide essential services in their areas. However, at the moment no Minister has the power, through manipulating the rate support grant settlement, to penalise individual authorities which increase their rates to meet the expected needs of their areas. Since he does not have these powers, the Sec-

retary of State is happy to take them in the local government Bill. That Bill is not yet law, but there is the promise or threat that if the local authorities do not do as the right hon. Gentleman tells them he will take retrospective action under that Bill to claw back rate support grant from individual authorities which will have assessed their needs and levied their rates on the basis of prevailing law. If that is not retrospective legislation, or near to it—something that is considered abhorrent in this country—I should like to know what is.

Mr. King: Has the hon. Gentleman never heard of resource clawback? Does he not know that what he has described is precisely what happens at present? I do not know whether his authority has suffered under this procedure, but during the middle of the year grant can be clawed back from authorities in the manner to which he is taking such great exception.

Mr. Roberts: That is true, but it is done under existing legislation. If the Minister is satisfied with that arrangement, why is he proposing to legislate to take further powers?

Mr. Ronald W. Brown: Will my hon. Friend tell the Minister that the resource claw-back is carried out for specific reasons but that the new provision is purely political—t will be applied to Labour authorities but not to the Conservatives?

Mr. Roberts: What does the legislation proposed by the Secretary of State seek to do, and why is he proposing it? In his statement to the Consultative Council on Local Government Finance, he says:
Resources element provides the same marginal rate of grant support to a local authority's expenditure regardless of how extravagant that expenditure might be.…Needs element is distributed on the basis of an analysis of past expenditure patterns.
Neither of those statements is 100 per cent. accurate. At present, needs element is assessed on a variety of factors, not merely on the basis of analysis of past expenditure patterns. It is related to spending needs, total population, the number of elderly people and the number of children. Resources element is essential in terms of trying to establish justice between one local authority and another.


Perhaps I may give an example—the city of Salford and the city of Manchester. The city of Salford—although some people who live in Salford might not admit it—has a city centre which is really within the city of Manchester. Most of the commercial property with high rateable values lies in the city of Manchester. If it were not for the resources element that enabled the city of Salford to get help in view of the fact that it does not have the same amount of property with a high commercial value in its area from which to attract rates, the city of Salford would have been in a fantastic mess over the last 20 years or so in terms of trying to carry out its policies of slum clearance and in dealing with serious inner city problems, lacking, as it does, unlike the city of Manchester, the commercial centre that is needed to raise the revenue necessary to carry out those policies.
The Secretary of State is getting rid of the needs element and the resources element and introducing this new block grant, which he or his civil servants will determine by an assessment, on the same basis for all local authorities, of standard expenditure and a standard rate poundage levied on an authority's rateable value. If ever there was an attack on the freedoms and independence of local government, this is the worst, because no local councillor can take decisions about his area if he cannot take decisions about the amount of money that he can raise from the rates to meet the area's needs, as he sees them in the light of the result of the democratic election that he has fought.
Only last week, the consequences of the Government's financial policies were highlighted in the local newspaper in Bootle, in my constituency—not by the Labour councillors in the area, who are in opposition, but by the Conservative chairman of housing, Councillor Keith Parkinson. He announced the probable £4 rent increase. In so doing and referring to the Government's economic policies and the cutback in Government support to local authorities, he said:
Sefton has been carrying out this policy for some time and the Government is simply saying what we have been doing. I can see nothing wrong with reducing the subsidy…I see no reason why those who could afford to pay should receive half their rent from public funds.

Not only are moneys to local authorities being cut in the RSG settlement. Housing subsidies are being cut, and local authorities, because of cuts in housing subsidies and in the RSG, are emptying their housing revenue accounts of rate fund contributions, pushing up rents by increases of £4 a week—at this particular time.
The hon. Member for Lichfield and Tamworth (Mr. Heddle) blames the previous Labour Government for the present rate of inflation. At a stroke, in this RSG settlement, in the cuts in housing subsidies, not counting VAT, the Government are pushing up inflation to a level at which working people in constituencies such as mine will be demanding wage increases to combat these massive rate and rent increases.
I do not see how Conservative Members can escape some responsibility not only for the present rate of inflation but for the rate of inflation that we are likely to have next year which will affect the rate support grant settlement.
The lion. Member for Liverpool, Edge Hill (Mr. Alton) referred to rates in Liverpool. I never know whether to call him my hon. Friend or my honourable enemy, because I am not certain whose side he is on. Indeed, he has become known in Bootle as Liverpool's nowhere man: a man who has no point of view and knows not where he is going. None the less, I think that he will be voting with the Labour Opposition tonight.
I predicted some time ago during Environment Question Time that we would have a crisis in Liverpool verging on New York proportions as we were likely to have a 40 per cent. rate increase. The Secretary of State said that I knew nothing about the rate support grant or how it worked if I could make a statement like that, because he had not then announced the settlement. He has now. Indeed, we are having a 40 per cent. rate increase, so Liverpool is verging on a New York crisis situation.
Liverpool suffered from a Lib-Tory pact which cut services, held down rates and put up council rents. There is nothing in the coffers. We had a deficit before we started, despite the cuts and the rate support grant settlement. Therefore, Liverpool people face cuts in services and a massive increase in rates at the same time.

Mr. Alton: Can the hon. Gentleman say whether the increase in Bootle, where there is a Conservative-controlled authority, is likely to be greater or less than that being suffered by Liverpool? Does he accept that rate increases throughout the country will be incredible as a result of the announcement of the rate support grant settlement today? Does he agree that to try to lay the blame on individual local authorities is nonsense?

Mr.Roberts: Yes. There is not much difference between Liberal-Conservative rule in Liverpool and Conservative rule in Sefton. The problems are similar. One of the advantages that some Labour authorities have—it will not be long-lived under this Government—is having money in reserve because of prudent management. Neither Liverpool nor the metropolitan district of Sefton has that advantage. [An HON. MEMBER: "Which ones do?"] I do not have to name them. The Secretary of State has been naming them since he became the responsible Minister. He has called them over spenders because they spend money on essential social services, housing and education.
The difference between the city of Manchester and the metropolitan district of Sefton being asked to cut services is like asking one man to take off his overcoat—that is the city of Manchester—when another man—Sefton—is already stripped to his underpants. If we have to make any further cuts, everyone, including those who receive the services, will be embarrassed.
The Government are trying to get Labour councils and councillors to do their dirty work for them in the hope that, when the cuts are made and the rate bills go through the doors, the town halls, not they, will be blamed. I assure them that the Labour movement will ensure that that does not happen. If the Secretary of State thinks that Labour councils are stupid enough to allow that to happen, he is greatly mistaken.
We must in the national interest fight the cuts in public expenditure which are being imposed on local authorities. It is not in the national interest to cut public expenditure It is not a matter of cutting our coat according to our cloth. We believe that public expenditure is essential for the good of the country and its economy. Public expenditure leads to

more private expenditure and to more jobs. In areas such as Merseyside the only hope is public expenditure, and much of it must come through the local authorities.

Mr. John Major: When I came into the Chamber early this afternoon, I did not expect to speak in the debate. However, having listened to the opening remarks of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) I felt that I should like to refer to some of his observations. I shall wait for a few minutes before doing so, in the hope that he may return to the Chamber. I hope that the hon. Member for Norwood (Mr. Fraser) will also return, because he made some remarks about Lambeth on which I should like to comment.
The rate support grant settlement was awaited with considerable trepidation in the counties. It was awaited with trepidation, first, because of the effect of the rate support grant throughout the past four or five years and, secondly, because of the economic situation and the fear that there would be substantial cuts in the level of grant.
If I may speak for Cambridge shire in particular, a county that has done badly in the past four or five years, there was an expectation this year that the 61 per cent. level of grant would be considerably reduced in the light of economic circumstances. When it was not, there was great relief that the Secretary of State had decided to maintain it at that level for the present year. Whether that can be done in future years is a matter which the course of the Government's counter-inflationary policy may well reveal in the months to come. I hope that it will be possible in future, in the light of the general reduction in expenditure, to look for a lower percentage of grant when it can be introduced without undue hardship for rural and urban counties.
The most favourable aspect of Government policy with which the counties were especially pleased after the events of recent years was the distribution of the rate support grant. Being parochial for a moment, I must say that the own county or Cambridgeshire has lost about £20 million per year in the past four years. This year, for the first time in the last five years, Cambridgeshire has found its


grant maintained at a level at which it could reasonably have expected it to be mantained. Cambridgeshire had a minor gain, but certainly there was not a continuation of the loss suffered in recent years.
I am an urban creature. I have spent most of my life in urban areas. There has been some suggestion from hon. Members who represent urban areas—I can understand it—that there is no need for the money to be returned to the counties because they do not face special problems and that the justification for any form of switch back to the counties is extremely flimsy.
I say to those who think that way—again using as an example Cambridgeshire, which is atypical to a degree but none the less symptomatic of what has happened—that in Cambridgeshire there has been the most enormous population growth over the past four or five years. Much of that population growth has come from inner city areas. For a variety of reasons, including the policies of the borough councils in city areas, people have tended to flee from the inner city areas to the rural counties of England. In my own constituency of Huntingdonshire we have large overspill estates of Londoners, at Huntingdon and St. Neots. We also have half of the Peterborough new town in the constituency.
I turn for a moment to deal with what was said by the hon. Member for Norwood. Three years ago I had the privilege of being the chairman of the housing committee in the London borough of Lambeth for a brief period. I shall give an illustration, from those days, of why it is practical justice that there should be some return of the rate support grant to the county areas.
At that time, when I was housing chairman in Lambeth, we had precisely the problems which exist today, and one of the initiatives which we were pleased to take, and which people in Cambridgeshire were happy to see adopted, was the expansion of Peterborough new town and a special linking agreement so that families and individuals could move out of Lambeth, where conditions were appalling, into Peterborough new town. There has in fact been an enormous spillage of people specifically from Lambeth into my constituency of Huntingdon-

shire, and especially into the northern ring of it in Peterborough.
The effect of that over the past nine or 10 years has been cumulative, but, from the standpoint of the services needed to cater for that large influx of people, the reward for Cambridge shire's gratuitously saying "Yes, we will assist" was year by year to see a continuous reduction in the level of rate support grant.

Mr. Marks: What is the rate poundage now paid in the hon. Gentleman's constituency, compared with the 119p that the Government are giving as the standard?

Mr. Major: I shall come to that, because there are other matters which need to be adjusted with that, as was pointed out a little earlier. The point that I am making now, specifically in response to the hon. Member for Norwood, is that the reward for areas beyond London for endeavouring to assist with the London problem has been a continuing diminution in the amount of funds available to them. That is grossly unfair, since so soon as one accepts a large influx of population there is of necessity a call on a considerable number of services to be moved to a far higher level of operation, and the funds have simply not been there for that purpose.
There have been other references to Lambeth, and I have already said that I am an urban creature. In fact, I spent most of my youth living in one of the less salubrious parts of Brixton, and I am well aware of the problems of inner London and of Lambeth. In my view, the hon. Member for Norwood does less than justice when he fails to recognise that many of the problems of inner London have been generated from within by some of the barren policies of total municipalisation and the successive policies of rent control which have driven out of the privately rented sector so many units of accommodation which could have helped. This has been a material factor, and, although hon. Members on the Opposition Benches choose to ignore it, it has added and is still significantly adding to the real and understandable problems being faced today in Lambeth.
Lambeth and other boroughs have added to their own problems. I shall deal specifically with Lambeth, and perhaps with Camden, if I am pressed to do


so. These authorities are to a substantial extent recognised as spendthrift authorities. They have heavy social problems, they spend money on those problems, and that is understood, but beyond that they also go in for a large amount of quite gratuitous and unnecessary expenditure.
I put to the hon. Member for Norwood—he must have been most embarrassed about it—the example of the special newspaper produced by Lambeth borough council and distributed to every house in the borough asking people to join a march and demonstrate against the Government's cuts and economic policy. I do not know how much that cost, but the amount involved might well have helped with some of Lambeth's social problems. Moreover, as the hon. Gentleman knows, that was by no means an isolated example.
I turn now to the forthcoming demise of regression analysis. It has seemed to many of us, as I have said, that the spendthrift local authorities, like greedy crocodiles, have under this principle been fed with more and, because they were fed with more, have demanded more. That happened, as I have tried to show, at the expense of my county and other county areas, and the effects of regression analysis have seemed to us to be wholly unfair in a large variety of ways, and inflationary, too, in some respects. I suspect that, on its demise, the corpse of regression analysis will be the most popular in this or any other year.

Mr. Ronald W. Brown: I recall the hon. Gentleman in his period as housing chairman in Lambeth, but I do not recall the London Boroughs Association receiving from him any demand in respect of the loss of money in the rate support grant for London.

Mr. Major: The hon. Gentleman has a splendid memory, for I do not recall ever having met him at that time, although I recall that on one famous occasion a lady threw a rat at me in the mistaken belief that she was throwing it at him. I am pleased to tell the hon. Gentleman that in the event she missed. But the hon. Gentleman makes a fair point, and I have to say that in my youth I made no such representations to the LBA. Perhaps I should

have done, but I certainly did not at that time.
The right hon. Member for Spark-brook talked of the reduction of services as a result of the rate support grant settlement and of the deflation of the economy. The right hon. Gentleman has a charming style of delivery but a flawed memory. It is barefaced for him to talk about deflation in the light of the policies of the Cabinet in which he sat as such a distinguished ornament for so long, namely, as Secretary of State for Prices and Consumer Protection.
I recall that his right hon. Friend the Member for Leeds, East (Mr. Healey), the former Chancellor of the Exchequer, was a great deflater. Usually the right hon. Gentleman deflated in panic, and usually at the behest of the IMF rather than as part of a considered policy. The present restraint, difficult and painful though it may be, has a clear objective, which is the continued reduction in the level of inflation.
There has been some talk—notably by the hon. Member for Bootle (Mr. Roberts)—of the levels of inflation and other problems. The hon. Member for Liverpool, Edge Hill (Mr. Alton), in his usual fashion, blamed Conservatives and Socialists—indeed, everybody except Liberals. It seems that disaster follows whenever the Conservative Party or the Labour Party enters into a pact with the Liberal Party.
I remind those who criticise the Government for the levels of inflation, and the results of those levels, of a distinguished speech that was made by the right hon. Member for Leeds, East at the Lord Mayor's banquet in 1976. I do not have his speech chapter and verse before me, but I recall that he touched upon the principle of the time lag between input and the outturn of inflation. If my memory serves me correctly, in 1976 the right hon. Gentleman was talking of a time lag of 18 months. I suggest that before Labour Members blame the Government for the present level of inflation they should re-examine that speech and their own views.
I am sorry that the hon. Member for Edge Hill left the Chamber so soon after completing his speech. He talked about the reduction of services. Out came all the usual pat arguments about meals


on wheels and grannies who are to be shot by wicked Tory councillors. He made precisely the mistake that I expected him to make. Every time that the hon. Gentleman and others with his views speak, they refer to the reduction of services. They never think about the reduction of staffing levels—it is always "Maintain staffing levels and get rid of the services." Whatever we may think about the level of unemployment, that is a most barren and dangerous philosophy and not in the interests of ratepayers whom councillors are elected to serve. We have heard a great deal about local democracy and the necessity for councillors to serve their ratepayers.
There has in some respects been an aggregation of responsibilities for local authorities. My area provides an illustration of how staffing levels may be maintained, or even cut, notwithstanding a population growth of nearly 25 per cent. The staffing level of the Huntingdon district council, which includes a housing authority, has remained broadly static over the past five years. It is valid to consider those who voluntarily retire and leave local government each year. I think that the number is well in excess of 100,000. Without wholesale sackings and draconian measures, there is the possibility of staffing reductions without the desperate reductions of services that are often claimed as likely to ensue. I believe that the figures offer a practical way in which we may proceed out of our present problems.
As we proceed, it is highly desirable that, in real terms and over a period, the level of Government commitment to local authority expenditure via the rate support grant should fall. I hope that it will. I hope, too, that at some stage we are able to find a rather better system than rates to fund local government. My heart goes out to my right hon. Friend the Member for Bridgwater (Mr. King), the Minister for Local Government and Environmental Services, whenever anyone suggests that the rating system should immediately be reformed wholesale. The anomalies in the rating system are recognised. However, I hope that my right hon. Friend will take good time to consider the issue, so that when he brings forward proposals they are more likely to be right than wrong.
Some hon. Members have spoken of the wicked habit of my right hon. Friend the Secretary of State of postponing the rating revaluation. I was tempted to intervene at the time, but I was not sure of the facts. However, I am sure now. I hope that the Opposition spokesman will confirm that not one rating revaluation has been carried out by a Labour Government since the war. Whenever the issue appeared, they scrapped it. It just did not happen. Not once have they proceeded with a rating revaluation. I suggest that when they criticise us for the practical measure of removing the rating revaluation because of the rapidly impending reform of the rating system, they should have a look at their record first.
I conclude by congratulating my right hon. Friend the Secretary of State on balancing most carefully the twin needs of trying to reduce the sum total of Government expenditure, in the general interests of containing inflation, and trying to strike a balance between urban and rural areas which will bring equity and fairness to both.

Mr. Gordon Oakes: Without doubt, this is the most important and by far the most damaging rate support grant ever to come before the House. I am surprised that, although the level and quality of the contributions to the debate have been high, so few hon. Members—both sides of the House are equally to blame—seek to participate. Many hon. Members, certainly myself, came into Government via local government. We were schooled there; it was our apprenticeship. Therefore, I should have thought that there would be a high participation rate in the discussion of any order affecting local government. Also, all hon. Members find that a considerable amount of the time, probably 75 per cent. or 85 per cent., that they spend dealing with constituency problems is devoted to local government problems rather than national problems. Any order affecting local government as massively as tonight's one has immediate repercussions upon all hon. Members.
It may well be that one reason why hon. Members do not participate in such debates is the form and shape of the orders. Frankly, they look more like tables of logarithms than the documents


that usually come before the House. They might frighten off some hon. Members. For that reason, I do not propose to go into the minutiae of the formula. Five years ago, between 1974 and 1976, I had the misfortune to be the junior Minister at the Department of the Environment who dealt with rate support grant. I did not fully understand the grant then. I understand it less now. However, one thing is certain. The complicated jargon, confusion and difficulty of the formula have not changed from that period of time. It is rather like the old games that we played as schoolboys—think of a number, double it, add one and, in the case of RSG, divide by 2·3045, take away the number first thought of, and that produces the allocation for the local authority of the needs element of the rate support grant for the next 12 months. To any outsider, certainly to many councillors in local authorties, it seems to be like that.
I treated seriously the criticisms that I received when I was Under-Secretary, particularly those from Conservative Members, about the complication of the formula. They all pointed out that it should be simpler and presented in a more simple way. They were right. I tried to do so and I failed. I notice that those who made the criticisms at the time have tried to do that and they, equally, have failed. However, one thing could be done within the existing system. In a moment, I shall come on to talk about the proposals under section F.
One of the main criticisms that I had as a Minister—I am sure that it is true today—was the complaint that the statistical information that goes into the grant is hopelessly out of date and that authorities are penalised thereby. I received that complaint more than any other. In these days of microprocessors, computers and rapid communication of statistical information, I am surprised that that should still be so. I am certain that the same complaint will be made about the rate support grant that we are discussing tonight.
This rate support grant is unusual because it has two distinct parts. For that reason, unusually, my right hon. and hon. Friends will be dividing tonight against the order. One part is the ordinary financial provision for this year and next.

That is a matter that we always debate—the amounts that local authorities will receive. However, there is a second part. Section F of the order has been the subject of considerable debate. The Government would probably call that section a declaration of intent, but I would call if a threat of punitive dictatorship.
On a number of occasions the Secretary of State has tried to have fun with my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) about his approach to local authorities. However, my right hon. Friend does not encourage local authorities to spend, spend, spend for spending's sake, nor does he encourage them to waste money. He encourages local authorities to stand up for their rights and for the services for those who elected them. They are not to be dictated to by central Government. The Secretary of State cannot level the same criticisms at me, and he knows it.
The hon. Member for Liverpool, Edge Hill (Mr. Alton) mentioned that when the late Mr. Anthony Crosland was Secretary of State for the Environment he told local authorities in Manchester in 1974 that the party was over. I was the unfortunate junior Minister who had the invidious task of going up and down the country shouting "Time gentlemen, please" and collecting the glasses. That was not a very pleasurable occupation, but it worked. I worked by exhortation, not by force, threats or punitive measures. It worked not because we cut the rate support grant as it is now being cut but because it persuaded both Tory and Labour local authorities of the need to an it. I agree with the hon. Member for Edge Hill that that is the approach to take rather than the draconian measures introduced by the Government.

Mr. Heseltine: The right hon. Gentleman will take into account that he had an Opposition who supported what he, as Minister, was trying to do. This Government do not enjoy that facility.

Mr. Oakes: I tried to persuade local authorities not to waste money and not to cut into essential services as this Government have done. At that time, in 1975–76, we suffered because a massive number of new local authorities had been created by the Conservative Party in 1972. Those authorties were far-away places with strange-sounding names and


they cropped up all over the country. Expenditure ran out of hand at that time. The hon. Member for Rugby (Mr. Pawsey) fairly made the point that that was one of the major causes of the highest increases in local authority expenditure that Britain has ever known.
The hon. Member for Huntingdonshire (Mr. Major) congratulated the Secretary of State on maintaining the level of rate support grant at 61 per cent. A number of other Conservative Members have also made that point. It is no such thing. The expenditure calculation behind the rate support grant and upon which it is based is £15,737 million. However, the figure put forward by the local authority associations for relevant expenditure was in excess of £18,000 million. The Government's figures are wrong. The Government are always arrogant about local government figures. I accept that there is a discrepancy in accounting procedures between central Government and local authorities, but not of this size. Mr. Jack Smart, the leader of the Labour group in the Association of Metropolitan Authorities, said that to talk about 61 per cent. of relevant expenditure was a myth.
There is a belief, even among hon. Members, although not the Government Front Bench, that every authority gets 6 per cent. rate support grant and has only to spend 39 per cent. That is not so, as the hon. Member for Altrincham and Sale (Mr. Montgomery) knows to his cost. His local authority has to find considerably more because of the vagaries of rate support grant.
In addition, the cash limits assume wage rises of about 13 per cent. I remind the House that over 17 per cent. of local authority expenditure is on wages, and there have been certain developments regarding wages since the right hon. Gentleman's meeting with the local authorities. The latest agreement is a 14 per cent. rise for local government manual workers which was agreed a week ago, and it is one of the best that the Government can hope for. An announcement was made this morning that wage increases in November 1979 were 19·2 per cent.—a 2 per cent. increase from October. That is the background against which these cash limits must be viewed. We must consider the pay of other local government workers as a result of the Clegg report—teachers, white collar

workers and craftsmen—whose rises have yet to be announced.
In addition to the 13 per cent. built into the rate support grant for wages, the non-salary figure is calculated at 9 per cent. Only a few days after the rate support grant was negotiated with local authorities, it was announced that the mortgage rate would rise to 15 per cent. and the bank rate to 17 per cent. I doubt whether even representatives from Conservative-controlled local authorities would have so readily agreed to the rate support grant had they known of the increase in the bank rate. As the right hon. Gentleman knows, the level of interest rate is of enormous importance to local authorities.
I am talking not only about approved capital expenditure, where a loan has to be obtained, but about the indirect results of a high bank rate. A local authority that does not have all its rates in and has to borrow money for expenditure will be badly affected. I hope that the Minister will assure the House that there will be general cover and not just for specific items where borrowing approval has been given.
The other major non-salary expenditure is for energy. It is significant that today, when the rate support grant is being discussed, we have had mention of swingeing increases in gas and electricity prices, all of which will affect local authorities adversely. The cost of motor fuel has also risen since the settlement was reached. All those items cost local authorities a great deal of money and will have a drastic effect on their expenditure this year and next.
The effect of the rate support grant will be twofold. Labour and Conservative local authorities will endeavour to reduce expenditure—they will have to—and introduce a lower level of services, although that will vary with the authority. We shall also have the most massive rate rises ever known as a direct result of the rate support grant.
The right hon. Member for Stafford and Stone (Mr. Fraser) made the point clearly when he said that Stafford was a prudent county that will endeavour to follow Government policies, and would even go so far as to reduce services. Despite all that, he assured his right hon. Friend that there would be rate increases of between 20 and 25 per cent. These are the sort of figures that we will get


in London and some other urban areas, even with major reductions in spending—I would say too heavy reductions in spending. Despite all that, there will be rate increases of more than 50 per cent. in many areas as a direct result of the order that is before us today.
I should like to quote the words of the Conservative-controlled Association of County Councils. In a document which went out with a letter from the secretary, Mr Hetherington, on 8 January, the association says:
The settlement means that authorities will be forced to make large rate increases as well as to cut back further the level of their expenditure and the standard of their services. The ACC's membership have always been, and will continue to be, strongly interested in achieving maximum efficiency and economy in the provision of their services. But it cannot be contended that the expenditure reductions sought by the Government, this year and next, can be achieved wholly, or even mainly, by improvements in efficiency: the level of service which local government provides has to fall if the expenditure 'targets' are to be achieved.
Those are not the words of the Labour Party; they are the words of the Association of County Councils.
The other effect of reducing services is on the levels of unemployment within local Government service. Thank God, no hon. Member in this debate has used the pejorative term of "bureaucrats" which we have heard in the past from Conservatives. Dinner ladies, teachers, firemen, and road roller drivers are not bureaucrats. Even if one considers administrators in the true sense of the word, I am surprised by the amount of vituperation of the media which brushes off on Conservative Members. They should remember that they must often deal with local authority officials in their constituencies.
We do not always get the decisions we want from local authority officials, but we must remember that they are servants of the public just as we are. We have problems to put before them and they have problems as well. I do not see why the attack that is so frequently made by Conservatives on local authority workers should ever be made at all. It is unfair to suggest that they are bureaucrats—whether they are manual workers or administrators—and to speak of them as if in some way they are spongers on the community who do not deserve their wages.
These are the people who may lose their jobs as a consequence of cuts in services resulting from this rate support grant. Hon. Members should make no mistake about it: the level of cuts envisaged in this rate support grant goes far beyond the frills and far beyond dealing with waste and the elimination of unnecessary buildings. The cuts will go deep into the heart of employment, of both full- and part-time staff in local government. It is disgraceful that insufficient attention is given to the prospect of tens of thousands of local government workers being put out of work by the deliberate act of Government policy. Tomorrow we are, quite rightly, discussing the level of unemployment among steel workers. A considerably greater number of local government workers could lose their jobs as a result of Government policy, and the House should be aware of that fact.
I turn to the distribution of the needs element. When I was a Minister at the Department of the Environment, I could see the point that many shire counties made very forcibly to me about their special needs. There are difficulties of distance, of sparsity of population and of rural transport in many shire counties. These difficulties were put forcibly to me.
I should be glad, in normal circumstances, to see that the position of shire counties did not deteriorate. The difficulties of Welsh counties especially came to my notice while I was a Minister. But an improvement for shire counties has occurred at a time of considerable reduction in the amount of rate support grant. Shire counties are, therefore, helped at the expense of metropolitan areas, and especially at the expense of London.
My hon. Friends the Members for Norwood (Mr. Fraser), for Islington, South and Finsbury (Mr.Cunningham) and for Bootle (Mr. Roberts) posed the problems of local authorities, such as Lambeth. The expenditure of shire counties is often less because they export their problems to London. The young girl who is pregnant disappears into the city and becomes the responsibility of Lambeth or Islington. The runaway husband and the person without work also becomes, the problem of inner city areas, especially London.
I would normally welcome a greater proportion of grant for shire counties.


But the effects on inner areas can be considerable. It is regrettable that, at a time of savage reduction in the amount available, money has been given to the shire counties at the expense of all urban areas, especially London.
I turn to the contentious section F and the transitional arrangements contained in paragraphs 42 to 46 of the document. The balance between the House and local government is a delicate and sensitive partnership. We are elected by virtually the same franchise. Hon. Members are elected at national level and members of local councils at local level. We are responsible to our constituents. They are responsible to their constituents. For many years, a delicate balance has existed. The right hon. Gentleman is shattering that balance. The whole of section F reveals the arrogant contempt for local government and local government democracy that the right hon. Gentleman feels. That contempt is shown vividly when he is interrupted by my hon. Friends and retaliates against those authorities that he thinks will defy him.
I say "arrogant" for two reasons. There was no consultation with local authorities over the proposals in section F. I intend to quote chapter and verse of what the local authorities think. I accept that the previous Government of which I was a member put forward a Green Paper which advocated a unitary grant. It was not a unitary grant with all the punitive strings that the right hon. Gentleman has introduced. The previous Government put forward that proposal because it was recommended by the Lay field committee.
It is right that when a high-powered committee such as Lay field is set up, its proposals should be presented in Green Paper form to local authorities and to the nation for discussion. The local authority associations unanimously rejected unitary grants. My Government were democratic enough, and sufficiently sensitive to the balance between local and national government, to abandon the proposals for a unitary grant. The present Government have resuscitated the unitary grant without consultation and have added the punitive strings.
The attitude that has been adopted is doubly arrogant. As many hon. Members, especially my right hon. Friend the Member for Sparkbrook,

have indicated, the Government have included this proposal in the order before the Bill which will contain the legislation has been brought before the House. The Government's legislative timetable is in a mess. In nine months in office, they have introduced a Bill into the House of Lords and abandoned it, saying that they intend to introduce a Bill in the House of Commons. Nothing has been forthcoming, and it is almost February. Local authorities are awaiting that Bill to know what they need to do in next year's rating and rate support grant discussions. We have not even had the Second Reading of that Bill.
When I listened to the Secretary of State's replies to my right hon. Friend and other hon. Members about his yardstick for deciding which authorities were in defiance of the Government, were too big spenders, and all the other words that we have heard from him to describe those that offend him and his principles, I thought how subjective it all was. It is subjective in that it depends entirely on the Secretary of State's will and decision. What would have happened if we had dared to introduce such an arrogant measure as the present Government have introduced?
It was even more sinister when the right hon. Gentleman said that one of the ways in which he would judge whether an authority was in defiance of central Government was by the things that it said. No doubt the right hon. Gentleman will be the Secretary of State in 1984, so councils had better beware. The young bright-eyed councillor, of any party, who goes on to an authority not knowing much about the procedure will be warned by the chief executive "Do not say a word against the Government, or they will put us on their black list and we shall have our expenditure reduced." It was the right hon. Gentleman who said that one of the things by which he would judge an authority was not simply its level of expenditure, not what the money was spent on, but what it said. That is far too subjective a way in which to deal with local authorities.
The right hon. Gentleman said that he would have discussions and consultations with local authorities. That may be, but he has produced the order and we have had none yet. What is said by the Association of District Councils, a


Conservative-controlled organisation? It says:
The association is most concerned about Section F of the Order, relating to the proposed new grant structure and the transitional arrangements. This proposal strikes at the very foundation of our system of democratically elected councillors taking spending decisions in the light of local needs and circumstances." The ADC is quite right.
I think it was the hon. Member for Edge Hill who quoted the response of the Association of Metropolitan Authorities, which was similar. I should like to quote also the response of the Association of County Councils, in a letter of 10 January from Mr. Hetherington to me and, I think, to all hon. Members whose constituency is part of a shire. The letter said:
The report of the Secretary of State mentions the proposals for a new he proposals for a new 'block' grant system which were set out in the Local Government, Planning and Land Bill (H.L.), and proposals for transitional arrangements for 1980–81. These proposals are a matter of the utmost concern for the Association: we believe them to be strongly prejudicial to local democracy; neither do we believe that they are in the true interests of central government.
Therefore, when the right hon. Gentleman is doing his consultation with the local authorities, he has three Tory-controlled local government associations strongly opposed to the very principle of what he is trying to do in the order. He will have heavy weather with them, and, I suspect, with many of his hon. Friends as well as the Opposition.
My last quotation comes not from an association but from an individual councillor:
If the proposals are approved by Parliament, local democracy will be dealt a bitter blow. Very substantial additional powers will be placed in the hands of central government to influence the decisions of individual local authorities. The proposals threaten the survival of local government as we know it today and we shall be taking all possible steps to oppose these provisions.
That is not the leader of Lambeth council speaking. That quotation does not come from Sheffield. It comes from Mr. Tom Holman, a distinguished Conservative who is deputy-chairman of Cheshire county council. These are the people who are opposing this order, and I suggest that many Tory Members will also oppose the proposals in the Bill. Many Members on both sides of the House—particularly those who have

served in local government—have a deep and profound respect for local government. We shall not allow it to be trampled on in the arrogant way attempted by the Government in the rate support grant order and in the Bill.
I hope that many Conservative Members who have given great service in local government will think hard about the proposals. I also hope that other hon. Members, who know that their colleagues in local government have put them here, will do the same. I hope that they will all think hard tonight and, when the Bill comes before the House, about whether they should oppose it or at least abstain.
There will be serious repercussions from Conservative-controlled local authorities and associations and from Conservative Members of Parliament if the Secretary of State tries, in this arrogant way, to force the straitjacket of financial dictatorship on local authorities. If he does that, it will be at his own whim and without proper yardsticks and objective standards.
Section F alone is enough to cause my right hon. and hon. Friends and myself to oppose the order. There is much worse. The order means a drastic reduction in services for people most in need. It discriminates most against those urban authorities with the greatest need. In addition, it will produce a massive increase in rates for all authorities.
The Tories reduced income tax in the Budget and immediately increased VAT. They did that almost in the same breath. Few people benefited from the income tax reductions. Let the world outside and the House make no mistake about it: the Government are doing the same in the order. They are saying that, having reduced income tax, they need to reduce local and public expenditure. The result is that the rates are increased.
Hon. Members—particularly Tory Members—have described the rates increase as the most regressive of all taxes. The Government are transferring the burden away from income tax on to that most regressive tax. It is the latest con trick of a Government who have lost the confidence of the British public more rapidly than any other Government this century.
I hope that not only my right hon. and hon. Friends, and the Liberal Party, but some Tory Members will, in the interests


of local democracy, come into the Lobby with us tonight.

The Minister for Local Government and Environmental Services (Mr. Tom King): I welcome the right hon. Member for Widnes (Mr. Oakes) to the first local government debate in this Parliament. I did my homework on his earlier contributions since he referred to his earlier career in the Department of the Environment. I was hoping to find a suitable mine of his earlier speeches. However, I am afraid that his contribution on a previous occasion, in 1974, was rather more limited than on this occasion. Hansard noted that
The Under-Secretary of State for the Environment (Mr. Gordon Oakes) rose—"[Official Report, 27 June 1974; Vol. 875, c. 1782.]
Unfortunately, at that point a Liberal Member was rude enough to get in the way, and that was the sole, and not very large, contribution by the right hon. Gentleman in that debate. We welcome him on this occasion all the same.
The right hon. Member for Widnes was honest enough to say that he was trying to demonstrate that we are discussing a controversial and enormously important settlement but that the debate was marked by the emptiest Benches on the Labour side that he could remember during such a debate. That did not help his argument. I sympathise with him in his honesty.
The right hon. Gentleman admitted candidly that he found it difficult to understand the rate support grant system and the mechanics and finances involved. I have grappled with the system for several months and I understand his problem. The right hon. Gentleman made one mistake. He confused the estimate of outturn expenditure for next year—he used a figure of £18,000 million—and the relevant expenditure estimation, which is about £15,700 million at November 1979 prices. In order to make a proper comparison, one must add the adjustment for price changes and allow for increase orders and specific grants. A number of commentators have made the same mistake and have suggested that the Government are involved in a terrible plot. There is confusion about the terms in which the figures were originally expressed.
The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) complained that he had failed to receive a reply from the Government about what happens to the surplus on the housing revenue accounts. I am pleased to have the privilege of making an important statement on that matter. The consultation paper on the proposed subsidy system said that we should be making separate proposals about the way in which any surpluses that might arise on the housing revenue accounts could be used. It is an important and complex issue, and we are considering the alternative possibilities carefully. We shall be making proposals, as promised, shortly. I hope that that is clear and that we shall have further information shortly.
My hon. Friends the Members for Altrincham and Sale (Mr. Montgomery) and for Luton, East (Mr. Bright) and the hon. Member for Liverpool, Edge Hill (Mr. Alton) questioned the future of domestic rates. I do not need to repeat our anxiety about the rating system. We made clear in the election and subsequently that we had to give priority to the reduction of direct taxation and that, changes in the rating system or its abolition would have to take second place. We have started a review of alternatives, and I take note of the warnings by my hon. Friend the Member for Huntingdonshire (Mr. Major).
I turn to the issues raised by the right hon. Members for Sparkbrook and Widnes and the transitional arrangements in the introduction to the order. The right hon. Member for Sparkbrook waxed lyrical about a Bill of Rights and a constitutional outrage. We all enjoy a certain amount of hyperbole, which removes some of the dullness from our debates, but the right hon. Gentleman cannot seriously sustain his argument. There is no question of retrospection in terms of an order. No increase order is involved. Such an order will not be introduced until next November. The increase order about which the right hon. Gentleman waxed so lyrical will appear next November, when we trust that a Local Government, Planning and Land Act will be on the statute book. Such an order will be laid under that Act. We are giving guidance in advance. That is the proper way to proceed, and Governments of both parties have done that frequently.
The right hon. Member also was churlish enough to complain that we had not yet debated in the House the Local Government, Planning and Land Bill, which will shortly be introduced here. He complained about the way in which it had been handled, and the right hon. Member for Widnes complained about the way in which the Government were getting their programme in a muddle. That is particularly churlish, since we responded to an Opposition request. The Bill having been introduced in the House of Lords, the Government responded to representations by Labour Members that we should introduce it here, and if that is all the thanks we get it is no encouragement for us to respond in that way on future occasions.

Mr. Marks: Previously Governments of both parties have paid out money to local authorities on the ground that they were planning to bring in legislation. Has money ever been taken off them before under legislation yet to be introduced?

Mr. King: The clearest warning has been given at this time. The increase order is not paid until next November and the Government are perfectly entitled to make quite clear the basis upon which payment will be made subject to the approval by Parliament of the Bill and the order. The Opposition cannot possibly sustain a charge that such action is inappropriate or unconstitutional.
The next complaint concerned uncertainty faced by local authorities in fixing their rates. We have made clear and have given as much guidance as possible on what the notional uniform rate will be. That rate is, in essence, the middle ground of the rates of all authorities. It is implicit in the present way in which rate support grant is organised. We are merely making more explicit what is implicit. I should have thought that hon. Members would welcome that.
In those circumstances, it is inevitable that a number of authorities will exceed the notional uniform rate, but we have made clear that only those authorities that are substantially in excess—[HON. MEMBERS: "By how much?"]—I cannot answer that, because that will depend upon rating decisions that have not yet been made by a whole range of authorities, and those decisions will depend

upon their relative positions. However, it serves this warning: if there are authorities that are substantially in excess of any reasonable assessed spending need and they continue to increase their expenditure beyond what would be considered and what has been assessed—this assessment has been going on for many years—as a reasonable standard of assessment of need, they will obviously be moving into an area in which they could not expect automatically to enjoy the same continuing level of grant regardless of their expenditure.
I am told that this gives rise to great uncertainty, and I am asked how local authorities can possibly plan. The hon. Member for Bootle (Mr. Roberts) is not the world's greatest living expert on the rate support grant system. He now seems to have departed, after his contribution to the debate. He said that it was outrageous that local authorities could lose some grant on which they had budgeted midway through the year. He seems to be blissfully unaware that that is precisely the way in which the system operates at present. But the iniquity of that is that it happens because there is a finite pool, as my right hon. Friend explained, and that if certain authorities spend to an excessive level they attract to themselves more grant—and the only source of that grant, as we have seen in year after year, is from the more prudent and the more economic authorities.

Mr. Hattersley: On the specific question of retrospection, will the right hon. Gentleman explain why this following piece of reasoning is wrong? A London borough—let us hypothesise Lambeth—could, wholly within the law, in April increase its rate to 160p in the pound and express the view that it was doing it in defiance of the Secretary of State. That action at that time would be wholly legal. According to the Secretary of State and his circulars, that borough would be penalised in October. How is that not retrospection?

Mr. King: I was anxious to complete the whole of this section of my speech on the question of transitional arrangements, because I shall be dealing with the question of what is alleged to be punishment. If the right hon. Gentleman will allow me to do so, I shall complete it in my own way.
The second point covered in the arrangements is that we have made clear that there will also be the power to provide a waiver from any diminution or tapering of grant for those authorities which, although they may be very substantially above the level, have clearly made a significant effort to contain their levels of expenditure. The right hon. Gentleman will know that that is so.

Mr. Hardy: Will the Minister give way?

Mr. King: I think that it would be helpful to the House if I dealt with the whole of the transitional arrangements in one go. Then I shall give way to the hon. Gentleman.
Great excitement was aroused by the right hon. Member for Sparkbrook when he said that this was the most appalling, arbitrary, dictatorial use of power by my right hon. Friend the Secretary of State and that it would be exercised totally outside Parliament and without any question of parliamentary control. However, unlike, as I understand it, the claw-back arrangements, which I think are administrative arrangements under which authorities lose funds to which they have previously thought they were entitled, under this arrangement, when we reach a time at the end of next year when the next increase order has to be laid and the question of the allocation of that increase order and whether any authorities will suffer from tapering of grant will arise, it will be my right hon. Friend's responsibility to lay a report before Parliament, to set out in that report not only the details but the principles on which such tapering has been applied, and to get Parliament's approval for such action. Therefore, the right hon. Gentleman's allegation—I am sorry that he did not have the opportunity to check this matter before—that this was an arbitrary, dictatorial, extra-parliamentary act by my right hon. Friend is totally untrue.
I now turn to the issue raised about punishment, penalties and the question of people being penalised when acting in a perfectly legal way. The situation of local authorities remains exactly as it is. We have had some fairly flamboyant speeches about the end of local government and the undermining of local autonomy. Suggestions have been made and alternative schemes halve

been put forward to the effect that, somehow, there should be a cash limit on individual authorities, a ceiling on rate increases, or a cash limit on total expenditure of an individual authority. Any of those suggestions would totally undermine local authorities.
The situation is that the rate-fixing of local authorities will remain entirely the responsibility of councillors and local authorities. It will be up to them to determine their levels of expenditure. They will be entitled to fix their own rate levels. What we are saying is that we reserve the right on behalf of the taxpayer to determine just how far we are prepared to go on that journey with them. We are prepared and entitled to say not that they may not fix rates at whichever level they think is appropriate but just how far we are prepared to subsidise increasing levels of expenditure with public money.
People will be acting in a perfectly legal way. They will be entitled to fix their rates. There is no question of illegality. But we are giving the clearest advice that we can at the earliest possible stage that if people rate very substantially in excess of expenditure levels they cannot automatically expect a contribution of public money to accompany that.

Mr. Hardy: Will the Minister look at the metropolitan areas? Let us suppose that either a metropolitan borough or a metropolitan county grossly exceeded the levels of expenditure which the Secretary of State wishes to see. Given the method by which the present Government are operating, is it not inevitable that although the borough or the county may be not at fault, both of them would be penalised by these arrangements?

Mr. King: I accept that the hon. Member has raised a perfectly fair point on the transitional arrangements. Although it can sound more of a problem in the way in which the hon. Member has put it, I do not expect a great problem in that respect. But there is a technical difficulty here, and I accept that in that respect there is an element of rough justice.
I am surprised how many hon. Members are quite unaware of the current problems over the resource clawback. No one can claim that the present system is very fair.
A number of my hon. Friends and my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) asked about the block grant that we are proposing. I noticed that the right hon. Member for Sparkbrook kept referring to the unitary grant and made the interesting remark that he could not understand why, with the unitary grant, anybody should wish to continue to serve in local government. He seems to have forgotten that the Labour Government put forward the unitary grant when he was a member of that Government. We would not accept such a crude and unsatisfactory system as the unitary grant. We propose a number of important changes.
Everyone recognises that the rate support grant, in terms of its allocation, is not satisfactory and that there is a need for change in that respect. The Labour Govenment, as usual, put forward their Green Paper and, again as usual, did nothing about it for two years.

Mr. George Cunningham: I get the impression that the right hon. Gentleman is winding up his winding-up. I hope that he will not overlook the specific question that I put, which I hope was passed on to him, about the arrangement relating to London weighting.

Mr. King: I am trying to make progress, but the right hon. Member for Widnes ran over the time that I expected.
We are not prepared to continue a system of grant distribution and arrangement that rewards high spenders and penalises the prudent. We are determined to change that system. We are not prepared to have a system that removes the maximum autonomy from local authorities. Contrary to the many fears that have been expressed—I hope that in discussions on the Bill much of this will be clarified—I do not believe that it significantly alters the balance of autonomy or the relationship between local government and central Government.

Mr. Alton: Will the hon. Gentleman give way?

Mr. King: I should like to make some progress. The method of assessment of need is absolutely crucial. We have now started our discussions with the local authority associations. The work has started, and I hope that we shall be able

to produce for the House a more comprehensible, clear and fair system of needs element distribution than exists under the multiple regression analysis. As my right hon. Friend said, no one understands the system. It is far too complex. It is also self-sustaining in the drift that has taken place in its distribution.
I turn now to the points made by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). He will appreciate that his question about a Select Committee is not for me. He will also appreciate that the transfer of the police from local to national funds raises a fundamental issue.
The hon. Gentleman asked a question, of which I have a note, about the London weighting aspect. As there is some uncertainty whether we have the question right, perhaps he will write to me, and I shall give him an answer. I have an answer, but I suspect that it is not the answer to the question that he posed.
The hon. Member for Manchester, Gorton (Mr. Marks) criticised the point on rateable values and the weaknesses there. As my hon. Friend the Member for Bridlington (Mr. Townend) said, that came ill from a member of a former Labour Government when no Labour Government ever since the war had a single rating revaluation.
The hon. Member for Norwood (Mr. Fraser) raised the point about local authorities and the position of those authorities that defied the Government on expenditure cuts. They are perfectly entitled to do that and are within their legal rights. They may continue to do so. What those authorities cannot automatically expect is that they will get Government support for their actions. I should like to make that quite clear.

Mr. John Fraser: Mr. John Fraser rose—

Mr. King: May I just give an instance of this? My hon. Friend the Member for Bridlington drew attention to his experience of local government and the way in which Conservative local authorities sought to support the Labour Government when they called for economies in earlier years. I thought that it was disingenuous of the right hon. Member for Sparkbrook when he said "Ah, yes, but things are different now, because this is a Government who are attacking local government and calling for massive


economies." I recall that we were the Government who called for 1½ per cent. economies in one year and that it was the right hon. Gentleman's Government who called for 2½ per cent. economies in one year. I note just how much those standards have changed, and how quickly.

Mr. George Cunningham: I must protest at the way in which the Minister has dealt with my question. My question was put before 8 o'clock. When I put a question, which may be obscure, before 8 o'clock in a debate asking for it to be dealt with in the winding-up speech, there were plenty of opportunities for me to be found to clarify any obscurity. That is not the proper way in which a Minister should respond.

Mr. King: That is perfectly fair point to make.
Having discussed the transitional arrangements and the block grant, the real subject of the debate is the rate support grant orders. The lack of attendance earlier in the debate, and the lack of criticism in Parliament and outside it, makes clear our contention that these are tough but fair and realistic orders. They are a stark contrast to the orders laid a year ago by the right hon.

Member for Stepney and Poplar (Mr. Shore), who is now present. He had the nerve to criticise the increase order that we made when in fact the previous Government assessed it at 5 per cent. for wage settlements and 8½ per cent. for inflation, and even invited local government to go for 1½ per cent. growth.

We faced a very difficult economic picture—one that we inherited from the previous Government. The suggestion that the right hon. Member for Sparkbrook tried to make, that all our difficulties started with a Conservative Government, is the most outrageous calumny, and he knows that all too well.

In these orders we have sought to establish a fair and reasonable settlement. It is a settlement that gives local authorities the opportunity to rate fairly in the present situation. We shall make every contribution that we can in giving local authorities freedom in charging and removing controls to loosen the burdens of expenditure that lay upon them. We believe that we have made a fair rate support grant settlement, and on that basis I commend it to the House.

Question put:—

The House divided: Ayes 305, Noes 257.

Division No. 138]
AYES
[10.08 pm


Adley, Robert
Browne, John (Winchester)
Dykes, Hugh


Aitken, Jonathan
Bruce-Gardyne, John
Eden, Rt Hon Sir John


Alexander, Richard
Bryan, Sir Paul
Edwards, Rt Hon N. (Pembroke)


Alison, Michael
Buchanan-Smith, Hon Alick
Eggar, Timothy


Amery, Rt Hon Julian
Buck, Antony
Elliott, Sir William


Ancram, Michael
Budgen, Nick
Emery, Peter


Arnold, Tom
Bulmer, Esmond
Eyre, Reginald


Aspinwall, Jack
Burden, F. A.
Fairbairn, Nicholas


Atkins, Rt Hon H. (Spelthorne)
Butcher, John
Fairgrieve, Russell


Atkins, Robert (Preston North)
Butler, Hon Adam
Faith, Mrs Sheila


Atkinson, David (B'mouth, East)
Cadbury, Jocelyn
Farr, John


Baker, Kenneth (St. Marylebone)
Carlisle, John (Luton West)
Fell, Anthony


Baker, Nicholas (North Dorset)
Carlisle, Kenneth (Lincoln)
Fenner, Mrs Peggy


Banks, Robert
Carlisle, Rt Hon Mark (Runcorn)
Finsberg, Geoffrey


Beaumont-Dark, Anthony
Chalker, Mrs. Lynda
Fisher, Sir Nigel


Bell, Sir Ronald
Channon, Paul
Fletcher, Alexander (Edinburgh N)


Bendall, Vivian
Chapman, Sydney
Fletcher-Cooke, Charles


Benyon, Thomas (Abingdon)
Churchill, W. S.
Fookes, Miss Janet


Benyon, W. (Buckingham)
Clark, Hon Alan (Plymouth, Sutton)
Forman Nigel


Berry, Hon Anthony
Clark, Sir William (Croydon South)
Fowler Rt Hon Norman


Best, Keith
Clarke, Kenneth (Rushcliffe)
Fox, Marcus


Bevan, David Gilroy
Clegg, Sir Walter
Fraser, Rt Hon H. (Stafford &amp; St)


Biffen, Rt Hon John
Cockkeram, Eric
Fraser, Peter (South &amp; St)


Biggs-Davison, John
Colvin, Michael
Fry Peter


Bottomley, Peter (Woolwich West)
Costain, A. P.
Gardner, Edward (South Fylde)


Bowden, Andrew
Cranborne, Viscount
Garel-Jones, Tristan


Boyson, Dr Rhodes
Critchley, Julian
Glyn, Dr Alan


Braine, Sir Bernard
Crouch, David
Goodhew, Victor


Bright, Graham
Dean, Paul (North Somerset)
Goodlad, Alastair


Brinton, Tim
Dorrell, Stephen
Gorst, John


Brittan, Leon
Douglas-Hamilton, Lord James
Gow, Ian


Brocklebank-Fowler, Christopher
Dover, Denshore
Gower, Sir Raymond


Brooke, Hon Peter
du Cann, Rt Hon Edward
Grant, Anthony (Harrow C)


Brotherton, Michael
Dunn, Robert (Dartford)
Gray, Hamish


Brown, Michael (Brigg &amp; Sc'thoroe)
Durant, Tony
Greenway, Harry




Grieve, Percy
Marland, Paul
Sainsbury, Hon Timothy


Griffiths, Eldon (Bury St Edmunds)
Marlow, Tony
St. John-Stevas, Rt Hon Norman


Griffiths, Peter (Portsmouth N)
Marshall, Michael (Arundel)
Scott, Nicholas


Grist, Ian
Marten, Nell (Banbury)
Shaw, Michael (Scarborough)


Grylls, Michael
Mates, Michael
Shelton, William (Streatham)


Gummer, John Selwyn
Mather, Carol
Shepherd, Colin (Hereford)


Hamilton, Hon Archie (Eps'm &amp; Ew'll)
Mawby, Ray
Shepherd, Richard (Aldridge-Br'hills)


Hamilton, Michael (Salisbury)
Mawhinney, Dr Brian
Shersby, Michael


Hampson, Dr Keith
Maxwell-Hyslop, Robin
Silvester, Fred


Hannam, John
Mayhew, Patrick
Sims, Roger


Haselhurst, Alan
Mellor, David
Skeet, T. H. H.


Hastings, Stephen
Meyer, Sir Anthony
Smith, Dudley (War. and Leam'ton)


Havers, Rt Hon Sir Michael
Miller, Hal (Bromsgrove &amp; Redditch)
Speed, Keith


Hawksley, Warren
Mills, lain (Meriden)
Speller, Tony


Hayhoe, Barney
Mills, Peter (West Devon)
Spence, John


Heddle, John
Miscampbell, Norman
Spicer, Jim (West Dorset)


Henderson, Barry
Mitchell, David (Basingstoke)
Spicer, Michael (S Worcestershire)


Heseltine, Rt Hon Michael
Moate, Roger
Sproat, lain


Hicks, Robert
Monro, Hector
Squire, Robin


Higgins, Rt Hon Terence L.
Montgomery, Fergus
Stainton, Keith


Hill, James
Moore, John
Stanbrook, Ivor


Hogg, Hon Douglas (Grantham)
Morris, Michael (Northampton, Sth)
Stanley, John


Holland, Philip (Carlton)

Morrison, Hon Charles (Devizes)
Steen, Anthony


Hooson, Tom
Morrison, Hon Peter (City of Chester)
Stevens, Martin


Hordern, Peter
Murphy, Christopher
Stewart, Ian (Hitchin)


Howe, Rl Hon Sir Geoffrey
Myles, David
Stewart, John (East Ronfrewshire)


Howell, Rt Hon David (Guildford)
Neale, Gerrard
Stradling Thomas, J.



Howell, Ralph (North Norfolk)
Needham, Richard
Tapsell, peter


Hunt, John (Ravensbourne)
Nelson, Anthony
Tebbit, Norman


Hurd, Hon Douglas
Neubert, Michael
Temple-Morris, Peter


Jenkin, Rt Hon Patrick
Nott, Rt Hon John
Thompson, Donald


Jessel, Toby
Onslow, Cranley
Thome, Neil (Ilford South)


Johnson Smith, Geoffrey
Oppenheim, Rt Hon Mrs Sally
Thornton, Malcolm


Jopling, Rt Hon Michael
Osborn, John
Townsend, John (Bridlington)


Joseph, Rt Hon Sir Keith
Page, John (Harrow West)
Townsend, Cyril D. (Bexleyheath)


Kaberry, Sir Donald
Page, Rt Hon Sir R. Graham
Trippier, David


Kimball, Marcus
Page, Richard (SW Hertfordshire)
Trotter, Neville


King, Rt Hon Tom
Parkinson, Cecil
van Straubenzee, W. R.


Kitson, Sir Timothy
Parris, Matthew
Vaughan, Dr Gerard


Knight, Mrs Jill
Patten, Christopher (Bath)
Viggers, Peter


Knox, David
Patten, John (Oxford)
Wakeham, John


Lamont, Norman
Pattie, Geoffrey
Waldegrave, Hon William


Lang,Ian
Pawsey, James
Walker, Bill (Perth &amp; E Perthshire)


Langford-Holt, Sir John
Percival, Sir Ian
Walker-Smith, Rt Hon Sir Derek


Lawrence, Ivan
Pink, R. Bonner
Waller, Gary


Lawson, Nigel
Pollock, Alexander
Walters, Dennis


Lee, John
Porter, George
Ward, John


Le Marchant, Spencer
Prentice, Rt Hon Reg
Warren, Kenneth


Lennox-Boyd, Hon Mark
Price, David (Eastleigh)
Watson, John


Lester, Jim (Beeston)
Prior, Rt Hon James
Wells, John (Maidstone)


Lewis, Kenneth (Rutland)
Proctor, K. Harvey
Wheeler, John


Lloyd, Ian (Havant &amp; Waterloo)
Pym, Rt Hon Francis
Whitelaw, Rt Hon William


Lloyd, Peter (Fareham)
Raison, Timothy
Whitney, Raymond


Loveridge, John
Rathbone, Tim
Wickenden, Keith


Luce, Richard
Rees, Peter (Dover and Deal)
Wiggin, Jerry


Lyell, Nicholas
Rees-Davies, W. R.
Wilkinson, John


McCrindle, Robert
Renton, Tim
Williams, Delwyn (Montgomery)


Macfarlane, Neil
Rhodes James, Robert
Winterton, Nicholas


MacGregor, John
Ridley, Hon Nicholas
Wolfson, Mark


MacKay, John (Argyll)
Ridsdale, Julian
Young, Sir George (Acton)


Macmillan, Rt Hon M. (Farnham)
Rifkind, Malcolm
Younger, Rt Hon George


McNair-Wilson, Michael (Newbury)
Roberts, Michael (Cardiff NW)




McNair-Wilson, Patrick (New Forest)
Roberts, Wyn (Conway)
TELLERS FOR THE AYES:


McQuarrie, Albert
Rost, Peter
Mr. David Waddington and


Madel, David
Royle, Sir Anthony
Mr. Robert Boscawen.


Major, John






NOES


Abse, Leo
Booth, Rt Hon Albert
Carter-Jones, Lewis


Adams, Allen
Boothroyd, Miss Betty
Cartwright, John


Allaun, Frank
Bottomley, Rt Hon Arthur (M'brough)
Clark, Dr David (South Shields)


Alton, David
Bradley, Tom
Cocks, Rt Hon Michael (Bristol S)


Anderson, Donald
Bray, Dr Jeremy
Cohen, Stanley


Archer, Rt Hon Peter
Brown, Hugh D. (Provan)
Coleman, Donald


Armstrong, Rt Hon Ernest
Brown, Robert C. (Newcastle W)
Concannon, Rt Hon J. D.


Ashley, Rt Hon Jack
Brown, Ronald W. (Hackney S)
Conlan, Bernard


Ashton, Joe
Brown, Ron (Edinburgh, Leith)
Cook, Robin F.


Atkinson, Norman (H'gey, Tott'ham)
Buchan, Norman
Cowans, Harry


Bagier, Gordon A. T.
Callaghan, Rt Hon J. (Cardiff SE)
Cox, Tom (Wandsworth, Tooting)


Barnett, Guy (Greenwich)
Callaghan, Jim (Middleton &amp; P)
Craigen, J. M. (Glasgow, Maryhill)


Beilth, A. J.
Campbell, Ian
Crowther, J. S.


Benn, Rt Hon Anthony Wedgwood
Campbell-Savours, Dale
Cryer, Bob


Bennett, Andrew (Stockport N)
Canavan, Dennis
Cunliffe, Lawrence


Bidwell, Sydney
Carmichael, Neil
Cunningham, George (Islington S)







Cunningham, Dr John (Whitehaven)
Hughes, Roy (Newport)
Prescott, John


Dalyell, Tarn
Janner, Hon Grevilie
Price, Christopher (Lewisham West)


Davidson, Arthur
Jay, Rt Hon Douglas
Race, Reg


Davies, Rt Hon Denzil (Llanelli)
John, Brynmor
Radice, Giles


Davies, Ifor (Gower)
Johnson, James (Hull West)
Rees, Rt Hon Merlyn (Leeds South)


Davis, Clinton (Hackney Central)
Johnson, Walter (Derby South)
Richardson, Jo


Davis, Terry (B'rm'ham, Stechford)
Johnston, Russell (Inverness)
Roberts, Albert (Normanton)


Deakins, Eric
Jones, Barry (East Flint)
Roberts, Allan (Bootle)


Dempsey, James
Jones, Dan (Burnley)
Roberts, Ernest (Hackney North)


Dewar, Donald
Kaufman, Rt Hon Gerald
Roberts, Gwilym (Cannock)


Dixon, Donald
Kerr, Russell
Robertson, George


Dobson, Frank
Kilroy-Sllk, Robert
Rodgers, Rt Hon William


Dormand, Jack
Kinnock, Neil
Rooker, J.W.


Douglas, Dick
Lambie, David
Roper, John


Douglas-Mann, Bruce
Lamborn, Harry
Ross, Ernest (Dundee West)


Dubs, Alfred
Lamond, James
Rowlands, Ted


Dunn, James A. (Liverpool, Kirkdale)
Leadbitter, Ted
Ryman, John


Dunnett, Jack
Leighton, Ronald
Sandelson, Neville


Dunwoody, Mrs Gwyneth
Lestor, Miss Joan (Eton &amp; Slough)
Sever, John


Eadie, Alex
Lewis, Arthur (Newham North West)
Sheerman, Barry


Eastham, Ken
Lewis, Ron (Carlisle)
Sheldon, Rt Hon Robert (A'ton-u-L)


Edwards, Robert (Wolv SE)
Litherland, Robert
Shore, Rt Hon Peter (Step and Pop)


Ellis, Raymond (NE Derbyshire)
Lofthouse, Geoffrey
Short, Mrs Renée


Ellis, Tom (Wrexham)
Lyons, Edward (Bradford West)
Silkin, Rt Hon John (Deptford)



English, Michael
Mabon, Rt Hon Dr J. Dickson
Silkin, Rt Hon S.C. (Dulwich)


Evans, loan (Aberdare)
McCartney, Hugh
Silverman, Julius


Ewing, Harry
McDonald, Dr Oonagh
Smith, Rt Hon J. (North Lanarkshire)


Field, Frank
McElhone, Frank
Snape, Peter


Fitch, Alan
McGuire, Michael (Ince)
Soley, Clive


Fitt, Gerard
McKay, Allen (Penistone)
Spearing, Nigel


Flannery, Martin
McKelvey, William
Spriggs, Leslie


Fletcher, Ted (Darlington)
MacKenzie, Rt Hon Gregor
Stallard, A. W.


Foot, Rt Hon Michael
Maclennan, Robert
Steel, Rt Hon David


Ford, Ben
McMahon, Andrew
Stoddart, David


Forrester, John
McMillan, Tom (Glasgow, Central)
Stott, Roger


Foster, Derek
McNally, Thomas
Slrang, Gavin


Foulkes, George
McWilliam, John
Straw, Jack


Fraser, John (Lambeth, Norwood)
Magee, Bryan
Summerskill, Hon Dr Shirley


Freeson, Rt Hon Reginald
Marks, Kenneth
Taylor, Mrs Ann (Bolton West)


Freud, Clement
Marshall, David (Gl'sgow, Shettles'n)
Thomas, Dafydd (Merioneth)


Garrett, John (Norwich S)
Marshall, Dr Edmund (Goole)
Thomas, Jeffrey (Abertillery)


Garrett, W. E. (Wallsend)
Martin, Michael (Gl'gow, Springb'rn)
Thomas, Mike (Newcastle East)


George, Bruce
Mason, Rt Hon Roy 
Thomas, Dr Roger (Carmarthen) 


Gilbert, Rt Hon Dr John
Maxton, John
Thorne, Stan (Preston South)


Ginsberg, David
Maynard, Miss Joan
Tilley, John


Golding, John
Meacher, Michael
Tinn, James


Gourlay, Harry
Mellish, Rt Hon Robert
Torney, Tom


Graham, Ted 
Mikardo, Ian 
Varley, Rt Hon Eric G. 


Grant, George (Morpeth)
Millan, Rt Hon Bruce
Wainwright, Edwin (Dearne Valley)


Grant, John (Islington C)
Miller, Dr M. S. (East Kilbride)
Walker, Rt Hon Harold (Doncaster)


Grimond, Rt Hon J.
Mitchell, Austin (Grimsby)
Watkins, David


Hamilton, James (Bothwell)
Mitchell, R. C. (Soton, Itchen)
Weetch, Ken


Hamilton, W. W. (Central Fife)
Morris, Rt Hon Alfred (Wythenshawe)
Wellbeloved, James


Hardy, Peter
Morris, Rt Hon Charles (Openshaw)
Welsh, Michael


Harrison, Rt Hon Walter
Morris, Rt Hon John (Aberavon)
White, Frank R. (Bury a Radcliffe)


Hart, Rt Hon Dame Judith
Morton, George
White, James (Glasgow, Pollok)


Hattersley, Rt Hon Roy
Moyle, Rt Hon Roland
Whitlock, William


Haynes, Frank
Mulley, Rt Hon Frederick
Willey, Rt Hon Frederick


Healey, Rt Hon Denis
Newens, Stanley
Willams, Rt Hon Alan (Swansea W)


Heffer, Eric S.
Oakes, Rt Hon Gordon
Williams, Sir Thomas (Warrington)


Hogg, Norman (E Dunbartonshire)
Ogden, Eric
Wilson, Rt Hon Sir Harold (Huyton)


Holland, Stuart (L'beth, Vauxhall)
O'Halloran, Michael
Wilson, William (Coventry SE)


Home Robertson, John
O'Neill, Martin
Winnick, David


Homewood, William
Orme, Rt Hon Stanley
Woodall, Alec


Hooley, Frank
Owen, Rt Hon Dr David
Woolmer, Kenneth


Horam, John
Park, George
Wrigglesworth, Ian


Howell, Rt Hon Denis (B'ham, Sm H) 
Parker, John 
Young, David (Bolton East)


Huckfield, Les
Pavitt, Laurie



Hudson Davies, Gwilym Ednyfed
Pendry, Tom
TELLERS FOR THE NOES:


Hughes, Mark (Durham)
Penhaligon, David
Mr. John Evans and


Hughes, Robert (Aberdeen North)
Powell, Raymond (Ogmore)
Mr. Joseph Dean.

Question accordingly agreed to.

Resolved,
That the Rate Support Grant Order 1979, a copy of which was laid before this House on 28 November, be approved.

Resolved,
That the Rate Support Grant (Increase) Order 1979, a copy of which was laid before

this House on 28 November, be approved.—[Mr. Heselane.]

Resolved,
That the Rate Support Grant (Increase) (No. 2) Order 1979, a copy of which was laid before this House on 28 November, be approved.—[Mr. Heseltine.]

RATE SUPPORT GRANT (SCOTLAND)

The Secretary of State for Scotland (Mr. George Younger): I beg to move,
That the Rate Support Grant (Scotland) Order 1979, a copy of which was laid before this House on 28 November, be approved.
In introducing the order to the House I shall be a brief as I can. I hope that my hon. Friend the Under-Secretary will be fortunate enough to catch your eye, Mr. Deputy Speaker, at the end of the debate to deal with points that will be raised by hon. Members in the course of the debate.
Before coming to the provisions of the order, I should say a few words about the economic background that has led to it. The extremely difficult economic background to the settlement is summarised in the opening paragraphs of the White Paper "The Government's Expenditure Plans 1980–81", Cmnd. 7746. The White Paper notes the long-term deterioration of the British economy and points out that under the previous Administration public spending plans were increased on assumptions about economic growth that were, and can now quite clearly be seen to be, quite unrealistic. The previous Administration's proposals were set out in the White Paper, Cmnd 7439. A growth of just under 1 per cent. annually was planned for local authority current expendture for the years from 1978–79 to 1982–83.
No justification can be found for that from the economic prospects of the same period. I should have thought that Labour Members would recognise that those prospects were, to say the least, bleak and difficult throughout that time. Moreover, that substantial further rise would have followed a substantial growth of about 18 per cent. in total between 1973–74 and 1978–79. Indeed, that was equally difficult to justify by any calculation or even cursory study of the economic circumstances of the period.
The lack of realism shown by the previous Labour Government and by Labour Members over expenditure levels was also carried into their forecasts of cost increases. The most notable example of that was the forecast made at the time of the 1979–80 grant settlement that local

authority wage costs would rise by 5 per cent. in the ensuing year. It was apparent to everyone from the outset, even when the announcement was made, that the forecast was totally misconceived. It was, of course, rapidly overtaken by the high wage settlements for local authority employees made during the past year.
The over-optimism that underlay the initial forecast was not only ingenuous but was damaging, in the sense that when preparing their budgets local authorities placed little credence on estimates of grant entitlement under the increase order, as they saw that it made no sense even before they got it. Loss of confidence as between central and local government in this way is always regrettable, and it creates considerable problems leading to budgeting and estimating based on figures that no one believes in—even at the time of their making.

Mr. Dennis Canavan: Is not the Secretary of State being over-optimistic and completely unrealistic in basing his rate support grant order on a rate of inflation of 13 per cent. when inflation is already approaching the 20 per cent. mark? We are unlikely to get inflation down to 13 per cent. in the lifetime of this silly Government.

Mr. Younger: It is my besetting sin that I am always far too kind to the hon. Gentleman. I should not have given way to him, because I shall come to that point later. His comparison is misleading, because he was looking back to a former rate of inflation whereas we are looking forward to 1980–81 in this order.
Unlike our predecessors, we are determined to tackle the root cause of the economic difficulties in which we find ourselves. To that end, stabilisation of public expenditure and realistic forecasting are an essential part of our economic strategy. My right hon. Friend the Secretary of State for the Environment made that same point this afternoon. As a piece of extra information, I should add that my right hon. Friend the Prime Minister's recent statement about further reductions in public expenditure in 1980–81 does not affect the provisions of the order.
Local authority current expenditure forms a substantial proportion of total public expenditure in Scotland. On


taking office last year, I was acutely concerned to learn that local authorities were planning to exceed by nearly £50 million the expenditure estimate on which the rate support grant settlement for 1979–80 was based.
I am, of course, aware that that excess was above the figures commended to authorities through the rate support grant settlement for 1979–80 by my predecessor. I support the objective of controlling local authority expenditure that has frequently been expressed by the right hon. Member for Glasgow, Craigton (Mr. Millan), along with his colleagues. There is no doubt that the general tendency that has been shown by authorities to budget for ever-increasing levels of expenditure was encouraged by the lax attitude generally shown by the previous Labour Government on fiscal matters. That has been touched upon by Conservative Members and by several courageous Labour Members.
Accordingly, as a first step in bringing current expenditure under control, I asked all authorities in Scotland to review their spending plans and to ensure that actual expenditure was held to the level assumed in this settlement and, indeed, below that if possible.
I warned authorities at the same time that if they failed to heed my advice they would have difficulty in adjusting their programmes to the more realistic level of expenditure that I had in mind for 1980–81 and future years. I am hopeful that authorities will constrain their expenditure, although I am sorry to say that there is evidence, especially in manpower figures for the second quarter of the year, that further action still needs to be taken. It can only be seen as worrying that in September 1979, at the time of the last manpower survey, the figure for local authority manpower was 7,319 greater than in September 1978 and no less than 13,336 greater than in September 1977. I hope that all in local government will look carefully at that matter and do their best to correct it.
Turning to 1980–81, I have based the rate support grant settlement on a volume of expenditure just over 2 per cent. less than the corresponding figure for 1979–80. Before deciding on that level, I undertook consultations with the Convention of Scottish Local Authorities, which were both extensive and effective. From May to

November, my hon. Friend the Member for Edinburgh, Pent lands (Mr. Rifkind), who has responsibility for home affairs and the environment, and I met the convention, or its president and office-bearer, on seven separate occasions.
Hon. Members know that the convention, naturally enough, has reservations about some aspects of the settlement, but it has been good enough to acknowledge that it has had ample opportunity to express its view. That is how things ought to be, and I shall do my best to see that that is so.
Overall, the convention's contribution was most helpful and effective. It was one of the factors that I took into account in my review of all the expenditure programmes for which I am responsible and that enabled me to set the necessary reduction of all local authority expenditure in 1980–81 at £145 million, compared with the £175 million originally contemplated and which I originally put to the convention. Also, by accepting the convention's recommendation that a higher proportionate cut should be made in capital rather than in current expenditure, I was able to set the reduction in current expenditure relevant for RSG at only 3 per cent. of the figure planned by the previous Administration.
Although I have been greatly encouraged by evidence from a number of individual authorities that the force and sense of the Government's economic policies are recognised by them and that an overall reduction in expenditure of the order now proposed should be attainable without prejudicing essential services, it is most disturbing to me, and I dare say to ratepayers, that other authorities are contemplating budgets reported to involve substantial rate increases. I believe that many hon. Members will agree that it is a pretty commonly held view by ratepayers and the public at large that expenditure growth and rating levels must be checked.
I must therefore clearly warn any authority that is making irresponsible decisions that the Government will not bail it out and that its ratepayers and electors will undoubtedly hold the authority responsible if excessive spending leads to excessive rating levels.

Mr. Donald Dewar: Will the right hon. Gentleman


give an estimate of what he believes the likely rate increases will be on the assumption that local authorities take the advice set out by the Government and embodied in the rate support grant order? As the right hon. Gentleman knows, we tried hard to get this information from the civil servants at the hearing of the Select Committee on Scottish Affairs. Perhaps understandably, they said that they could not give it, but an addendum to the report says that
A number of estimates"—
of rate increases—
were however made within the Scottish Office of what the increase in the total rate burden might be on various assumptions.
Will the right hon. Gentleman therefore tell us what these estimates and assumptions are?

Mr. Younger: I am afraid that I am not in a position to do that. Any estimate made at this time would be wholly irrelevant and would depend on decisions that local authorities still have to make. An estimate made by me would have no meaning and no relation to the likely level of rate increases in various authorities.

Several Hon. Members: Several Hon. Members rose—

Mr. Younger: I shall give way in a moment. It would not have any relation to anything that made any sense, and in any case it is not my practice to give future estimates of this kind. This is a matter that must await the decisions of individual local authorities.

Mr. Norman Buchan: The right hon. Gentleman is wrong. The report of the Select Committee has an addendum that makes it crystal clear that the assumptions were made. A number of different assumptions and calculations of estimates were made of the total rate burden. What were the assumptions and the relevant estimates based upon them? The crucial question is this: given that every local authority obeys the Secretary of State's guidelines, what is the likely increase?

Mr. Younger: That is something that has been done in the past. Incidentally, I noted that an estimate was made last year that was wildly wrong—wrong by 100 per cent. or more. The right hon. Member for Craigton made an estimate

that the increases were likely to be in single figures, but they turned out to average 20 per cent. He can correct me if I am wrong, but I understand that those are the figures. I do not intend to make an estimate of that sort at this time. I am waiting for the decisions of individual local authorities in the light of the guidance and guidelines that have been given. I have given local authorities the strongest possible advice to be careful in their expenditure and not to be extravagant. If they follow that course, they should be able to keep rate increases to a reasonable level. That is the correct position for me to take at the moment.

Mr. Robert Hughes: But it is made clear in the addendum supplied by the Scottish Office civil servants that certain assumptions were made about rate burdens. We are not asking for a whole range of different assumptions. The one question we ask is whether the estimate has been made and the evidence provided to the Select Committee is accurate. If it is accurate, on the basis that local authorities do exactly as the Government wish, what is the likely effect of that on the rates?

Mr. Younger: The assumptions to which the hon. Member refers are not assumptions made by Ministers in the course of ministerial discussions. They are made as working assumptions as a result of much official work over many months. They are not definitive assumptions. Incidentally, I can confirm that I was correct in suggesting that the estimate made by the right hon. Member for Craigton last year was that the average rate increases in 1979–80 would be in single figures, provided that local authorities accepted the previous Government's guidelines on inflation assumptions. In the event, the average increase was about 20 per cent.

Mr. Bruce Millan: Will the Secretary of State now give us the figures for 1980–81? Is he seriously suggesting that the Government have produced this order without any idea at all of the rate increases next year in Scotland? That cannot be so.

Mr. Younger: My general maxim for approaching my task is not to repeat any of the mistakes made by the right hon. Gentleman. As his error was clearly demonstrated as a 100 per cent. error, I


might be well advised not to embark upon the same course.
Paragraphs 9–20 of the report give a brief account of the assumed level of expenditure on particular services. Since time is short, I shall not go over the ground exhaustively under each heading. It is, of course, for individual local authorities to decide what level of current expenditure to incur on particular services. My hon. Friend will be glad to reply to any questions on particular services that hon. Members may wish to raise during the debate.
There are two points that I should make. The expenditure estimates for many services show a small increase compared with 1979–80. In particular, I have urged authorities to give priority to maintenance of law, order and protective services and services for the handicapped and disadvantaged. But in proposing a material reduction in expenditure on education—the largest single programme—I have taken into account the continuing decline in the school population. It would be irresponsible for the Government to propose continual increases in total expenditure having regard to such a steady decline in pupil numbers.
The reductions proposed for 1980–81 assume that authorities will be able to make significant savings on milk, meals and transport as a consequence of the greater discretion that we intend they should be given as to the nature of and the charges for these services, without in any way imperilling exemptions from charges as appropriate.

Mr. John Maxton: In view of his statement about the decline in pupil numbers, which is happening in the primary schools and is beginning to happen in the secondary schools, will the right hon. Gentleman explain why he has asked for restraint and cutbacks both in the further education sector and in the area of the central institutions that are under his direct control, where over the next few years there will be a large expansion in the number of people entering?

Mr. Younger: I accept the hon. Gentleman's point. The position of those sectors is that we can allow for some growth, but I accept that it will not be as much growth as we should like, and it will probably not be as much as the

demand would require if we had all the money that we wanted. This is one of the many factors that we shall all have to face—the fact that we do not have, and will not have for a long time in the future, the money to doall the things that we want to do. Nevertheless, the hon. Gentleman made a valid point, and no doubt he will develop it further if he has the opportunity.
On the basics of education—the classroom work in our schools—we plan to maintain standards. Whereas the pupil population is expected to decline by 2·8 per cent. in 1980–81 compared with 1979–80, the expenditure that we are allowing declines by only 1·4 per cent. As is mentioned in the report, expenditure per pupil will actually rise during 1980–81, from £538 per head to £548 per head.
Paragraph 22 of the report records that the rate of grant for 1980–81 will remain at 68½ per cent., the same as in 1979–80. The background to my decision to keep the same rate of grant is that I am anxious to ensure that local authorities are able to meet the expenditure levels proposed without placing an undue burden on ratepayers. I very much hope that authorities will respond positively to the lead that I have given by exercising stringent control over their expenditure programmes.
Application of the grant percentage to the relevant expenditure figure at November 1979 prices produces an aggregate grant of £1,362·8 million, of which £114·9 million is due to be distributed through specific grants. They are set out in appendix E of the report. That leaves £1,247·9 million to be distributed as rate support grant.
As in previous years, there will be a cash limit for 1980–81 on the additional grant that may be paid in due course, by way of increase orders, towards increases in the level of prices, costs and remuneration after November 1979. That cash limit will be £194 million. It is compatible with increases in costs affecting the level of relevant expenditure of 13 per cent. between 1979–80 and 1980–81. Allowance has also been made for the cost of outstanding comparability awards.
I must stress that this 13 per cent. assumption relates to local authority expenditure that is relevant for rate support grant and that other assumptions


may be appropriate for different or non-specialised purposes. I must also emphasise that the significant figure for local authorities is the £194 million cash limit on grant payable under the increase orders for 1980–81. This is a firm ceiling and I think that it is fair and realistic. It compares with the £63 million cash limit set last year on the basis of the absurd 5 per cent. wage increase, which turned out to be wholly inadequate.

Several Hon. Members: Several Hon. Members rose—

Mr. Younger: I have such an embarrassment of riches here. I do not know to which of the young eagles I am supposed to be giving way.

Mr. Dick Douglas: If the Secretary of State is not able to estimate the effects of his policy on rate increases, will he tell the House what effect his policy will have on the increase in unemployment or job losses in the public sector, particularly in relation to local authorities?

Mr. Younger: I wish that I could make such estimates. Even supposing I could do that, what good would it do me? The simple fact that is so important for all of us in the House to understand is that this is all the money that this country has earned and can afford to spend upon supporting local government. I am sure that the hon. Member for South Ayrshire (Mr. Foulkes), who is well versed in these matters, will accept that there is no such thing as a limitless, bottomless purse into which we can dig. Therefore, he must accept that were I able to make a calculation such as he wishes me to make—[Interruption.]

Mr. Deputy Speaker (Mr. Richard Crawshaw): Order. Since this debate started, many hon. Members have continually been making remarks from a sedentary position. The Minister has given way. If hon. Gentlemen wish to ask the Minister to give way, they must rise in their seats and do so. It is most discourteous of hon. Members to talk the whole time.

Mr. Younger: Thank you, Mr. Deputy Speaker.
I conclude my last point by saying that in the last two years the numbers in local government have increased by about 13,000. We are nearly bust as a

result. That is what has happened. The estimates laid down by the right hon. Gentleman have proved to be quite inadequate. The money to back them up is not there. It is not an option that is open to us. We must get our expenditure under control. It is essential that hon. Members on both sides face up to that.

Several Hon. Members: Several Hon. Members rose—

Mr. Younger: I shall be accused of taking up too much time if I give way again. If hon. Gentlemen will not find me discourteous, I hope that they will not mind if I carry on. I must allow time for other hon. Members to speak.
The ceiling also includes provision for the Clegg comparability awards, in addition to the provision for an annual rate of increase in relevant costs of 13 per cent.
The purpose of the £194 million cash limit—which will not be adjusted other than for the effect of interest rateson loan charges—is to make clear to local authorities what level of support they can expect for 1980–81 so that they may take action, whether in their budgeting or their wage negotiations, to contain their expenditure in the national interest.
I do not think I need delay hon. Members for long over the arrangements for distributing grant in 1980–81. They are similar to those adopted in 1979–80, with one exception.
Domestic relief will remain at 3p in the pound. The needs portion will be distributed on the same formula as that which was adopted in 1979–80, except that population estimates, as at June 1979, will be used in respect of total population and that the weighting for total population in the distribution formula will be increased so that grant transferred from the resources element—a matter that I shall deal with in a moment—will be distributed according to population. The amount of grant paid through the extraordinary expenses portion of needs element on the net costs of services and infrastructure connected with offshore oil exploration shows a small increase of £1·7 million over the corresponding figure for 1979–80. The resources element will be distributed in accordance with the relevant statutory provisions, the national standard amount being notified, as is usual, at a later stage when information necessary for its calculation becomes available.
The notable change to which I referred is in the ratio of the resources element to the needs element. I should explain that the actual rate poundage struck by each authority is an important factor in determining entitlement to resources element. In needs element on the other hand, distribution is based entirely on demographic factors. Individual authorities' entitlement is not influenced by decisions on expenditure or rates.
I have been anxious to discourage high levels of expenditure and I have accordingly reduced by about £100 million the amount of grant paid through resources element by altering the ratio from 1:4—as in 1979–80—to 1:7. The effect of the change will not be substantial, provided that authorities show a uniform degree of responsibility in fixing expenditure and rates. It will, however, mean that total grant payable to an authority opting for a relatively high increase in rates will represent a smaller percentage of its expenditure than if the ratio had remained at 1:4.
In present circumstances, I think that there is general agreement that this is a just policy. I hope that authorities will respond positively. I shall weigh carefully the reactions of authorities as a whole and I am consulting the Convention of Scottish Local Authorities before deciding whether any changes are required in my statutory powers to enable me to give even more positive encouragement to stringent control of expenditure.
It is my wish to be able to announce to the House a rate support grant settlement that allows everyone in local government to expand services and spend more money. It would be totally irresponsible to do that today. I have no prospect of doing that and there is no prospect of a rate support grant in such a style under this or any other Government for many years.
I hope that everyone will now adjust to the idea that money does not grow on trees. We have to cut back expenditure to what we can afford. Until the economy begins to pick up, everyone in local government must learn to economise, as everyone in private life does already. With that in mind, I hope that local authorities will respond positively to our fair rate support grant settlement. It requires and encourages them to save

public money and the money which ratepayers are called upon to provide.

Mr. Bruce Millan: As some of my hon. Friends have indicated in questions to the Secretary of State, ratepayers are interested in the rate increase for next year. The Secretary of State makes his estimates on the assumption that local authorities do exactly as he asks—that they cut expenditure in the way that he requests and that they made the same assumptions about the rate of inflation. He is not willing to give those estimates to the House because they will show that substantial increases in rates will occur in the next year.
When I was Secretary of State, I provided estimates. As it happens, in the years before 1979–80, I overestimated because in each year the actual increase in rates was lower than the figure which I gave to the House. In 1979–80 the figure was greater because the authorities over-budgeted. The rates increase in the current year is not 20 per cent. but 14 per cent.
In the last two years taken together for which the Labour Government were responsible—1978–79 and 1979–80—the domestic rate-payers of Scotland paid less than a 10 per cent. increase in rates. The increases in 1980–81 will be substantial. A typical increase in rates next year will be between 25 per cent. and 30 per cent. In many local authority areas the increase will be higher than 30 per cent. I shall explain later why that is inevitable. The Secretary of State's refusal to be frank with the House about these matters is typical of the lack of frankness that we have seen, for example, on the housing support grant and on the form of the order before us.
Let me now deal with the question why the rate increases next year will be very large. Conservative Members had better understand that, because they will have some irate ratepayers to deal with next year and these increases will come deliberately and inevitably as a result of the actions of the Government and the meanness of the order.
Let me deal first with 1979–80, because the Secretary of State pretended that the variation in the grants was somehow generous. It is anything but generous, as his order brings out. Paragraph 5 makes


it clear that the moneys to which the local authorities were entitled have been reduced by £36·5 million. To put that in simple terms for Conservative Members, that simply means that a further £36·5 million has to be provided by the ratepayers. That is what happens when the Government cheat on the rate support grant and the cash limits and take the money from the local authorities.
COSLA says—perhaps in replying the Minister will deal with this—that the reduction has been not £36·5 million, but £63 million because another £26 million has been taken from the local authorities for other reasons and quite unfairly. I have no doubt that if that is not so the Minister will give us his information. The information that I am providing comes from COSLA, not from me.
Because of the reduction in grants for the current year it is unlikely that many local authorities in Scotland will start the next year with much cushion of balances in hand to enable them to moderate rate increases in that year. The direct result of these penalties on local authorities this year means that they will start next year with very little in the kitty and therefore the full rigour of the order will affect the rate increases next year.
To pretend that maintaining the same rate of grant is somehow a generous settlement is hooey, because when one takes account of cash limits one sees that the rate of grant will be considerably less than 68·5 per cent.
The right hon. Gentleman is making unrealistic estimates of savings and relevant expenditure for 1980–81. Ho says that the figure is only about 2 per cent. compared with the current year, but it is more than 3 per cent. compared with the projected figures in the Labour Government's White Paper. Without going into the Secretary of State's tortuous and unconvincing economic argument, I san say that there is no economic justification at the moment for the public expenditure cuts being made by the Government, and in Scotland the only effect of the cuts will be to add to an unemployment figure that will already probably increase substantially for other reasons in the course of next year.
At least the reduction of 3 per cent. is rather better than the reduction of 7½ per cent. that the right hon. Gentleman was

assuring us in the debate in July would be perfectly easily achieved by local authorities in 1980–81. I said then that that was nonsense, and the Secretary of State is having to admit that I was right. Nevertheless, the reduction is a very painful one.

Mr. Younger: Hear, hear.

Mr. Millan: I am glad to have that agreement. Ministers, including the Prime Minister, are trying to tell us that there are no reductions, that they are keeping public expenditure up and that they cannot understand what the fuss is about. The fact is that the cuts will be painful. I am glad that the Solicitor-General for Scotland who does not normally grace us with his presence on these occasions, also agrees with me.
The way that the Government reckon to achieve these savings in 1980–81 is, first, outrageous and, secondly, completely unrealistic. The vast bulk of the saving—without this saving the relevant expenditure figures will not be achieved—will be in education on school meals, milk and transport.
I got the figures in answer to a question on 17 December. The estimate for expenditure on school meals this year, at constant prices, will be £39·3 million, but next year it will be only £22·2 million—a reduction of 44 per cent. in 1980–81. That is utterly disgraceful. But it will not happen. It could take place only if the school meals service were completely savaged and, in some areas, obliterated. That will not be possible until the Education (No. 2) Bill goes through, and it will not go through in time for the start of the local authority financial year. If these savings are to be achieved—I say with absolute confidence that they will not be achieved in 1980–81—they will have to start from the autumn of 1980, and the reduction in school meals expenditure starting then will be considerably greater than 44 per cent.

Mr. Ian Lang: Does the right hon. Gentleman accept that because of the fall in pupil numbers expenditure, in real terms, next year will be up by £10 per pupil? Therefore, is he not giving a misleading picture?

Mr. Millan: The hon. Gentleman is talking about something different. That is a phoney figure as well.
I want to concentrate on school meals. According to the Secretary of State, expenditure on school meals is to be reduced savagely by 44 per cent. in 1980–81. The school meal charge would have to be increased to 55p or 60p a day—it is being increased anyway under the terms of the order that has been introduced—so that it would be about double what it was when the Government came to office. But it will not happen, because Scottish local authorities have no intention of obeying the Government's injunction on school meals. They are right to take that course, and I shall support them in their refusal to make these outrageous savings.
The Government estimate a reduction of 48 per cent. on school milk expenditure next year. The National Farmers Union does not like that. As a good deal of the money is subsidised by the EEC, it does not make sense in terms of the Government's intention to try to get more money out of the EEC.
There is to be a modest 14 per cent. reduction in expenditure on school transport, but regional authorities in Scotland have indicated that they will not change their school transport arrangements because of what the Government are asking them to do. COSLA has officially said that it wishes the clause on school transport to be withdrawn from the Education (No. 2) Bill. Even Grampian and Tayside, which are usually anxious to please the right hon. Gentleman by making any savings for which be asks, have said that they will not make reductions in school transport expenditure. There is no chance that savings on the scale asked for by the Secretary of State will be made next year. Therefore, the relevant expenditure figures—the figures for which the authorities will budget—will be higher than those in the order.
The Secretary of State will no doubt say that the authorities should make savings elsewhere. But other services are under pressure as well. There is considerable concern and agitation about public expenditure cuts in the social services, home helps, and so on.
Even the manpower figures are quite interesting. I agree with what the Secretary of State for Scotland said; his figures are perfectly accurate. I make it clear that I am not in favour of local authorities constantly increasing their manpower. I said that as Secretary of

State for Scotland and I repeat it now. Some of the increases during the past year are very worrying.

Mr. Peter Fraser: Mr. Peter Fraser (South Angus) rose—

Mr. Millian: Let me just finish this point. I received a useful answer today. If we exclude from the local authority manpower figures teachers, policemen and firemen, the total number of other employees is still actually less than it was in March 1976. These are the figures that I have received today.

The Under-Secretary of State for Scotland (Mr. Rifkind): The right hon. Gentleman is right, but will he accept that the figures show that there are 11,000 more employees than there were in 1977?

Mr. Millan: I agree with that. I have already said that there have been worrying trends over the past 18 months. I am agreeing with the Government on that. But the Government have given the impression that these are outrageous figures. However, it is still true—one has to say this on behalf of local authorities—that the number of general employees is lower than in 1976.
The number of policemen has risen substantially during the past year and so has the number of firemen. The Secretary of State shakes his head, but the figures he quoted this evening included policemen, firemen, and categories of employees that he wanted to see increase in number. Therefore, he was cheating a bit by the figures that he gave this evening.

Mr. Peter Fraser: If the right hon. Gentleman is so concerned about the increase in the number of local government officials taken on by local authorities, why, when he was Secretary of State for Scotland, did he do nothing to secure agreement with local authorities to give a breakdown of increases in recruitment, authority by authority, as has now been achieved?

Mr. Millan: The manpower figures were first published by the Labour Government. They had not been published before. It was under myself as Secretary of State for Scotland that we produced these figures because I was worried about local authority manpower.
The figures I have given are still accurate. A number of misleading things


are said about local authority manpower, and the idea that there has been, over the years, a remorseless increase in local authority manpower does not bear serious examination.
But if one wants to reduce manpower and one is not going to achieve—as this Government certainly will not—the savings in expenditure on school meals, milk and transport, it is necessary to look at the number of teachers. I suppose that is the reason why we had the extraordinary statements that the Under-Secretary of State made the other day about the excessive number of teachers in Scottish schools. I hope that teachers took careful note of those statements.
The main factor causing the rates to be considerably increased next year will be the cash limit. The cash limit of £194 million that the right hon. Gentleman has introduced, as he emphasised again tonight, is a firm figure. As I understand it, that figure will not be changed, whatever happens, apart from allowing for loan charges.
That has not happened before. Before, the Government have always said that the cash limit was based on assumptions and that if the assumptions proved to be false adjustment of the cash limit would be considered. The difference here is that the right hon. Gentleman is saying that the figure is firm. So it does not matter what happens to inflation; local authorities will not receive any more money.
The inflation rate that is written into the cash limit is 13 per cent., but nobody, not even the right hon. Gentleman, believes that the rate of inflation for local authorities next year will be 13 per cent. The general rate of inflation at present is 17½ per cent. Earnings, according to the latest figures published today, have increased by 19·2 per cent. over the past year. Even the leaked Treasury document on costs, about which we read in the newspapers over the weekend, contained a figure of 14 per cent. for wage settlements, and I understand that when the Civil Service complained about that the Government gave certain assurances that it would not necessarily apply to civil servants. Rents will go up, as we saw on Monday, by 33 per cent.
The truth is that the Government are gaily putting up the cost of all sorts of

other essential services. Only this afternoon we heard what is to happen with electricity and gas. In these circumstances, to pretend that the figure of £194million and the 13 per cent. inflation rate are realistic is nonsense.

Mr. Lang: Is the right hon. Gentleman proud that his Government a year ago anticipated a rate of inflation of 5 per cent. and does he agree that a rate of 13 per cent.—

Mr. Millan: Mr. Millan rose—

Mr. Deputy Speaker: Order. The right hon. Gentleman gave way to the hon. Member for Galloway (Mr. Lang), and it is not right for him to stand up while the hon. Gentleman is still making his intervention.

Mr. Lang: Does the right hon. Gentleman feel that his Government's figure of 5 per cent. a year ago was more realistic in anticipating inflation than the 13 per cent. given by my right hon. Friend for prospective inflation?

Mr. Millan: In fact, the figure was not 5 per cent., but if the hon. Gentleman will look not only at what was said but at what was done in previous rate support grant orders he will see that the cash limits were adjusted for increases beyond the assumptions that were made at the point at which the cash limits were originally calculated. The point that I am making is that this year nothing will happen; even if inflation goes to 20 per cent. the local authorities will get nothing more.
Moreover, the figure of £194 million includes amounts for comparability settlements and the rest, and the Secretary of State has refused to give a breakdown. The cash limit figures fixed by the Labour Government were on every occasion broken down in detail for COSLA at the settlement meeting. The COSLA representatives were able to discuss them, and, for that matter, we sometimes adjusted the figures on the basis of the comments made.
Now, however, the Secretary of State, with his open government, does not give COSLA any information, and he still refuses to give a breakdown of these figures.
What is clear—I could argue it but there is no time now so I simply assert


it—is that the figures included in the £194 million are extremely unlikely to meet local authority costs which will arise from the comparability studies, particularly in respect of teachers. I simply assert that, and I believe that that will be the situation.
What will the authorities do? The Secretary of State may think that he is being rather clever in refusing a lot of information and leaving them a bit in the dark, believing that he will get some sort of solution at the end of the day that will be more agreeable to him than otherwise. If he believes that, he is utterly misguided.
Of course, the local authorities could just assume a 13 per cent. inflation rate and finish up at the end of the year with very substantial deficits—which, incidentally, they are not by law permitted to do—but I forecast that what the typical local authority will do is make its own inflation estimate, which will be considerably above 13 per cent., and then rate accordingly.
In so far as an authority rates for inflation above 13 per cent., each 1 per cent. that it rates for will cost it three times as much as the figure for which there is coverage under the rate support grant. So if it estimates for an inflation rate of only 17 per cent., which is very modest, the rate increase by that alone will be 13 per cent. plus three times the additional 4 per cent., which will inevitably bring us to a rate increase of 25 per cent.
Even if the local authorities did all that the Secretary of State asked them to do, we could not, I believe, have average increases of less than 20 per cent., and I repeat that in my view they will be between 25 per cent. and 30 per cent., and in some cases more than that, because as well as the inflation factor there is the understatement in respect of comparability awards and there is also the un realism of the relevant expenditure that has been assumed in this order.
Perhaps the Government do not care. They do not seem to care. They were elected on the promise to reduce inflation, yet every major action they take has put inflation up, starting with VAT in the Budget and finishing with today's rate support grant order and the gas and electricity price increases announced this afternoon. Some Conservative Members looked rather sick this afternoon when the announcements were made. Some of them

do not look too happy now. No doubt they have in mind the prospects over the next year for ratepayers in the areas that they represent.
The Tories were elected on a myth, namely, that public expenditure was out of control and that they could make easy, painless savings. Public expenditure was not out of control. In the local authority sector the increases projected in the Labour Government's White Paper were modest and realistic. They could have been achieved and maintained. There could have been a decent level of essential services.
The Tories found themselves in office, and they have been attempting to wield the butcher's axe. The result of their policy is soaring inflation and rising unemployment. We shall have poorer local authority services. The poorer services will cost Scottish ratepayers considerably higher rates. That is the result of the order, and that is why the Opposition are voting against it.

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy Speaker: Order. The debate is due to conclude at eight minutes to 12 o'clock. Short speeches will enable more hon. Members to participate.

Mr. Barry Henderson: My right hon. Friend the Secretary of State has managed to secure a rate support grant order that brings real benefits to Scotland and contributes to the battle against inflation. Having listened to some Labour Members, one begins to form the impression that they regard the public service generally—this applies not only to their comments on local authorities—as a new form of job creation scheme to disguise the unemployment that the Labour Government created in the past five years. That is not the purpose of local government. That is recognised by the order.
The outturn this year is more than that for last year. Scotland's special needs are recognised. My right hon. Friend has redressed the unfair rigging of last year's order. Local authorities that curb expenditure will receive benefits. Those are some of the good features of the order. As for the latter feature, I hope that my right hon. Friend will go a great deal further when he introduces next year's


order. However, the order will give benefits to authorities that have been careful with their expenditure during the financial year. There should be some recognition of authorities with historical good records of careful expenditure. Cuts hurt most the authorities that have been the most careful in the immediate past. I hope that by next year my right hon. Friend will have found a way of recognising that in the rate support grant order.
As my hon. Friend the Member for Galloway (Mr. Lang) said, it is important to understand that the education budget provides more money per head of pupil than last year. As with the health services, so the personal social services are totally protected from cuts in the order.
I have referred to features that are contained in the order, but there are two items that should have been in it that are missing. First, I refer to local authority subsidies to bus operators. The traffic commissioners recently rejected the proposition from the Scottish bus group that fares should be increased equally across the board. There is a threat to the existence of the commissioners, and that rejection seems to be the first useful thing that they have done for a long time. I say that for one reason, if for no other—that the Fife regional council has done an enormous amount of work at the ratepayers' expense—

Mr. William Hamiliton: Of course, it is Labour-controlled.

Mr. Henderson: As the hon. Gentleman says. it is a Labour-controlled authority. I do not deny that. Because it is a Fife one, it is much better than most. It is not as bad as other forms of Socialism. Because of that work—greatly encouraged by the Conservative group on the council—savings have been created for Alexander's, the bus organisation that operates in Fife, of about £500,000. For the Scottish bus group to ask for an across-the-board increase in fares would be wholly unreasonable. Alexander's would not require that sort of fare level, because of the savings that have been made.
Not only is that cross-subsidy unfair to regional councils that operate effectively to help bus companies save money; there is further serious injustice that results


from bus operators being treated separately. If Alexander's makes a profit it pays corporation tax on that profit and it will not go to help other bus operators. That must be wrong. I hope that the Secretary of State will see that something is done about the cross-subsidy on the one hand and the corporation tax on profitable bus undertakings on the other.
Last but not least, I hope that in the coming year my right hon. Friend will take the necessary steps so that early in the next Parliament, when there is a Conservative Government, we shall see the final abolition of the domestic rate.

Mr. David Lambie: The first point that I shall make is one that I have made in previous debates on the rate support grant. The debate is a farce. In one-and-a-half-hour debate we are dealing with a rate support grant of £1·2 billion. No consultation has been held between the Government and hon. Members. In October of last year I made representations to COSLA asking that confidential negotiations between the Government and COSLA should be broken and that Members of Parliament should be involved in those negotiations. Unfortunately, COSLA did not accept that suggestion and tonight we are in the same position—hon. Members are being asked to vote "Yes" or "No" on large sums of money. I hope that the new Select Committee on Scottish affairs will look at the matter so that in future years we will not have this complaint. We should have more participation and negotiation by Members of Parliament in the debate before decisions are reached by the Government.
The Secretary of State said that the Government have given the same percentage award that the previous Government gave, 68·5 per cent. He did not stress, as was stressed by COSLA, that the percentage is on a narrower expenditure base. According to COSLA, the increase in cost that is to be paid by the local ratepayer, out with the 68·5 per cent., will be £63 million. Again, according to COSLA—as reaffirmed by my right hon. Friend the Member for Glasgow, Craig-ton (Mr. Millan) tonight—local ratepayers—even if councils carry out the Government restriction on such things as school meals, transport and milk—will be faced with increases of between 25 per cent.


and 30 per cent. Where Labour authorities say that they will maintain the services, ratepayers will be faced with increases of 35 per cent., 40 per cent or even 50 per cent. The Government must come clean and state clearly that they are estimating for rate increases of up to 30 per cent. across the board—even from Tory local authorities.
In 1978 we had a revaluation in Scotland. We should have had a revaluation this year in England and Wales. The Secretary of State for the Environment told English ratepayers that they could tear up their revaluation notices because the revaluation of England and Wales had been delayed. Has any account been taken of the fact that revaluations took place in Scotland but not in England and Wales?

Mr. Donald Stewart: Not for the first time, either.

Mr. Lambie: Can the Secretary of State explain why the domestic rate relief for England is 18½p and for Wales 36p, yet the domestic rate relief for Scotland is only 3p? These figures may have been correct last year but they are certainly not correct this year. I made that same point last year to the previous Labour Government. Why has that figure of 3 per cent. not been increased, bearing in mind that revaluation has not taken place in England and Wales?

Mr. Younger: If the hon. Gentleman wishes to complain about comparisons will he also complain that the percentage in Scotland is 68·5 per cent. whereas in England it is 61 per cent.?

Mr. Lambie: I accept that. Last year the figure was 68·5 per cent. as well. I have made this point before. I did not get a satisfactory answer last year, but perhaps I shall get a more satisfactory answer tonight.
Revaluation is an important factor. In the Scottish revaluation there was a shift away from the domestic ratepayer to the industrial and commercial ratepayer. Because revaluation has not taken place in England and Wales the Scottish commercial enterprise is at a disadvantage. Why has the Secretary of State not taken that into account in the rate support grant? Certain areas, such as those represented by my two local district councils of Cunningham and Kyle and Carrick, which are

mainly represented by Conservative Members, discriminated against the domestic ratepayer by imposing a higher than average increase in revaluation. Why did the Secretary of State, when he was in opposition, say that the ratepayers in Ayr, Troon and Argyll were being discriminated against in the rate support grant settlement, yet tonight nothing has been done to help those ratepayers?
I put it to those new hon. Members representing Tory constituencies—I am sorry that the hon. Member for Argyll (Mr. MacKay) is not here—that they must vote against the order, in order to represent their ratepayers. If they do not vote against the order they will not be playing fair by their ratepayers and they will be carrying out a policy that they criticised when they were in opposition.
1980–81 will be a hard year for ratepayers and for services. That is why shall vote against the order. I ask the Government to take the order away and to come back with a better one, which gives a better deal to Scottish ratepayers.

Mr. Donald Stewart: During the debate on Monday on the Tenants' Rights, Etc. (Scotland) Bill the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) claimed as a justification for the Government's action that they gave a pledge not to the local authorities but to the public in Scotland that every council tenant would have the right to buy his house. I refer to that Bill only to pinpoint the fact that whether one believes that the Conservative manifesto at the last election as a good one, a bad one, or something of a curate's egg, fact is that it was decisively rejected by the people of Scotland.

Mr. Henderson: So was the right hon. Gentleman's party.

Mr. Stewart: I am not forcing the SNP manifesto on to the people of Scotland. I wish that I were, and when we have a mandate to do so we shall. The Government have no mandate to bring in an order such as this, especially in a country whose oil is the lifeline of the Government, as their document states.
It is clear that the highest cuts will be in education, and the Government assume, as they say, that authorities will be able to effect substantial savings on


school meals, school milk and school transport. This is bringing us to the realisation of the old expression about the unkindest cut of all. But of course we have a Government run by a Prime Minister who first came to prominence as a snatcher of milk, and the Government's actions are based on the same ungenerous and unfeeling attitude.
The Government say that authorities will be able to effect substantial savings on school meals, school milk and school transport as a consequence of the increased freedom that they will have in providing and charging for these services. That is another example of the old expression about adding insult to injury, because it is fraudulent for the Government to make a virtue of giving local authorities power to use their own blood for the necessary blood transfusions.
The order also raises the question—I refer to it only in passing—of the functions that are being wished on local authorities by successive Governments. It is true that at first these functions were funded by the Government, but we are nearing the situation in which Governments will expect local authorities to carry on these functions, while withdrawing the necessary finance. I suggest that local authorities should think seriously of putting it to their people that these functions cannot be continued, and laying the responsibility for their retraction or withdrawal where it belongs, which is on the shoulders of the Government.
The cuts in education will have drastic consequences. Even the NFU in Scotland has been moved to protest. Parents with more than one child may find it impossible to send their children to school, particularly if they have to walk two or three miles to get there. There will be fewer passengers for buses. Bus services will be withdrawn. There will be more rural deprivation. There will be a spiralling effect. That is inevitable as a consequence of what is being done.
Let me deal with the school building programme. It is true that the demand for places has decreased, but what about the condition of the existing buildings? Many Victorian buildings are still in use in Scotland, and many of the buildings in my constituency—it is not alone in this—are more than 100 years old. These buildings ought to be brought up to a

proper standard. Some of them would not meet the requirements of the Offices, Shops and Railway Premises Act, yet children are being taught in these schools every day. That is the kind of thing that the Government are doing. The buildings should be refurbished to modern standards. That is what the situation demands.
Expenditure on recreational services is to be reduced by £3·5 million. Normally this would not be the highest priority of a Government faced with the need for financial stringency, but I ask the Secretary of State to consider the rising figures of unemployment, of young people running around with nothing to do. These young people ought to be used to the full, physically and mentally, yet, as I say, they are running around with nothing to do, and it is a serious matter that this provision is to be cut.
I shall not go into detail about the other services, but I agree with the view of COSLA that 13 per cent. is nonsense. Every Conservative Member knows that it is complete nonsense, and I should like to see them all stand up to defend it. These cuts are being made regardless of the needs of Scotland and without a mandate from the people of Scotland. We have more than our fair share of deprivation. The Government will never convince anybody in Scotland that there is any justification for the cuts in these services.

Mr. Iain Sproat: Unlike the right hon. Member for the Western Isles (Mr. Stewart), I support warmly and strongly the settlement which my right hon. Friend the Secretary of State has brought to the House tonight. In one word in his speech, which I thought was almost the most important thing he said, he described this as a realistic settlement. Realism was the one commodity which was totally absent from all the speeches we have heard by Labour Members.
The fact is that the Government had to cut public expenditure. [Hon. Members: "Why?"] If there is anybody in this country today, let alone in the House, who does not understand why we have to cut public expenditure, he cannot know the meaning of "bankruptcy" and he cannot realise how it was we came to that


dread situation. It was precisely because we had been led to the brink of bankruptcy by the Labour Government that it was essential to cut public expenditure, and local government had to bear its share of the cuts.
We understand, of course, why certain local authorities do not like it when told that they must cut back or restrain their expenditure. Nobody likes to be restrained on his favourite projects. If we understand that, those on the other side must understand that there just is not the money. It is no use crying out "We cannot cut", because they can cut. There is waste to be cut out.
Unfortunately, in the few minutes at my disposal I cannot list all the examples of waste. One need consider only one local authority—Lothian—which my hon. Friend the Member for Edinburgh, South (Mr. Ancram) has exemplied so often in the House. There is the miserable affair of the Haymarket escalator of £180,000—or was it £¼ million?—which it was just to throw away. Yet it says that there is no waste. The very same authority wanted to pay its employees to come from Edinburgh down to London—this is the profound irony of it—to lobby against cuts in public expenditure. Yet it says that there is no waste.
There was the sad and bizarre saga of the Lothian public relations department and the man who was to receive a golden handshake of £24,000. It turns out that it is not £24,000, but the officials are so ashamed of what it is that they will not tell us what the sum is.
There are thousands of examples of waste. I suggest to councils like Lothian and those hon. Members who represent them that they should take a leaf out of the book of Grampian regional council. Not only does Grampian regional council have the lowest administrative costs of any region in Scotland, but it gives value for money.
Hon. Members have spoken about school transport. Grampian was the first regional council to say "No, we will continue by giving support to rural transport, to support those of our people who live in the countryside". My right hon. Friend rightly said that councils have an option to do what they want. Grampian was so well run that not only did it have the lowest administrative costs but it now

says that it can afford to continue this vital service to its constituents. That is what I mean by having a good regional authority.
Not only in that way, but through its North-East of Scotland Development Authority, Grampian has managed to provide about 27,000 new jobs in the past five years. That should appeal to Labour Members as well as to Tory Members. So it is perfectly possible to have a region that is so well run that white having the lowest administrative costs in Scotland it gives the people of the region what they want.
Having said that to my right hon. Friend, I will enter one small caveat. It is on the question of the oil-related grant. Over the past five years Grampian region has spent about £30 million on providing infrastructure for oil companies. However, having spent £30 million, we have received only £16 million back from successive Governments. That deficit of £14 million has had to be borne by the ratepayers of Grampian.
I very much hope that my right hon. Friend, who has done so much in the settlement order to encourage thrifty regional councils, will look at Grampian. Not only has Grampian been thrifty but it has had the additional burden of an extra £14 million to push forward the national oil programme, and we maintain that the development of North Sea oil is a national programme that should have greater national funding.
Having said that, I completely support my right hon. Friend. He has made a realistic settlement. If Grampian regional council can do it, so can spendthrift councils like Lothian and Strathclyde. Let them get down to it now.

Mr. John Maxton: I shall be brief, as time is short, but I should like to develop the point that I raised with the Secretary of State for Scotland on the statistics on education that have been bandied around from the Government Benches.
I has been said that the figure has risen by £10 per head for children in school. A changing structure within the school and further education system, with fewer children at the bottom and more at the top, will inevitably cost more per child. It costs less to educate a primary school


child than a secondary school child doing highers or O-levels. It is a simple fact and there is no way round it, and it costs more again to educate a student in an FE college.
The Secretary of State accepted that we would have more people coming into the FE and post-school education area, but he said that we could not afford it, which is economic nonsense. Is he saying that the country does not want and need skilled and trained people, who are required by private industry if we are to get the economy going? Who will provide that training and ensure that there are more engineers and other skilled people? The only way to do that is through FE colleges, central institutions and universities, yet this Government say that they cannot afford to expand in an area that more and more people are entering.
I notice that the Secretary of State is nodding his head, and I therefore leave the matter there.

The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): The right hon. Member for Glasgow, Craigton (Mr. Millan) made great play of the fact that the Government are not willing to make estimates of what the rate increases might be, and took great credit for the fact that when he was Secretary of State he insisted on making rate estimates on each occasion. He did make such estimates, but on each occasion he was absolutely wrong. Sometimes they were higher than he expected and on other occasions lower, but never was he correct.
The simple point is that, if a rate estimate is given to a local authority, it will not be of the slightest use unless it bears some relation to the rates that it will be setting. For any Secretary of State to indulge in pleasant guesswork and give guesses, suggestions or estimates to local authorities, when the experience of the past few years is that these have been totally wrong, is a meaningless exercise that we do not intend to indulge in.
What is of importance to local authorities is that they should know the cash that will be made available to them. It is on the basis of cash and not estimates that they will be able to determine what rate increases are required, and they may

be slightly different in some areas, depending on the response to the Government's expenditure proposals.

Mr. Dewar: Does the Under-Secretary accept that estimates are often wrong because local authorities do not perform as the Government wish—and that point has often been made from the Conservative Benches? However, it is still valuable to have an estimate, which must be available, of what the rate rise will be if local authorities conform to the Government's wishes. We know that estimates have been made from the evidence of the Select Committee, and will the Minister now give us the estimate?

Mr. Rifkind: The point was conceded by the right hon. Member for Craigton that rate increases will be different in different areas, even if local authorities respond to the Government's wishes, and the hon. Gentleman must be aware of that. What is important to authorities is to know the cash that will be available, the cash limits and the nature of the distribution of the rate support grant. That information is being made available, and it is only right and proper that it should be.
The right hon. Member for Craigton made various predictions about rate increases. Of course we all know of one local authority that intends to reject any attempts to make savings, and to impose upon its ratepayers in the Lothian region a rates increase of 38 per cent. We might have expected the right hon. Gentleman to give some condemnation, advice, suggestion or exhortation to people of his own party who, contrary to the public interest, are refusing to meet a reasonable request. It may have been thought that the reason this is happening in the Lothian region is the intolerable burden being put upon councils by the Government. Yet after the rate support grant was announced, Councillor Bill Taylor, the secretary of the ruling Labour group on Lothian region, was quoted in an article in the Edinburgh Evening News of 17 November which read as follows:
Lothian region's Labour councillors had expected much tougher cuts from the Government than those announced by the Secretary of State. Councillor Taylor agreed that he and his colleagues were not as annoyed by the Government's spending plans as they had expected to be.
The ratepayers of Lothian region can take some comfort from the fact that they


are expected to suffer a rates increase of only 38 per cent., because Councillor Taylor was not as annoyed as he might have been.
The simple fact is that if local authorities accept the Government's advice on expenditure there will, of course, be rates increases, as there were under the previous Government. But these will be modest—not the frightening increases that the Lothian region appears to be contemplating.

Mr. Harry Ewing: Mr. Harry Ewing (Stirling, Falkirk and Grangemouth) rose—

Mr. Rifkind: I am sorry, but I cannot give way. It is very important for me to answer the points that were made in the debate.
The right hon. Member for Craigton also referred to the manpower situation, and indicated his rather mild complacency that, because the figures in 1976 were slightly higher than they are now, we could ignore the fact that in the last two years they have increased by some 13,000. What is most worrying is that even the last quarterly figures show a frightening increase in Scotland at a time when the figures in England and Wales are actually beginning to fall. This must be a matter for concern because the overall figures conceal the fact that, while some responsible authorities are reducing their manpower, progress in this area is being offset by increases elsewhere.
The right hon. Gentleman also said that he did not believe that inflation would be only 13 per cent., and therefore the Government were being wicked in using that figure. Did he believe that earnings would increase by only 5 per cent. when he used that figure in his negotiations with local authorities? We know for a fact that the level of earnings increased by three times that amount, and, whatever doubts some authorities might have about our cash limit, they far prefer it, as a more realistic assessment of their requirements, to the bogus figures used by the right hon. Gentleman when he was in charge.
My hon. Friend the Member for Fife, East (Mr. Henderson) referred to the problem of assisting prudent authorities, rather than giving out even-handedly to high spenders. This year we have made

a radical change in the needs-resources ratio in Scotland. We have transferred £100 million from resources element to needs element, which, while it has not affected the total aggregate of grant available, has ensured that those authorities that insist on levying high rate poundages will not benefit at the expense of the general taxpayer. This is only the beginning of many other changes that the Government are contemplating to ensure that prudent authorities benefit from their prudence and profligate authorities do not benefit from their profligacy. I believe that the public as a whole will welcome this.
The hon. Member for Central Ayrshire (Mr. Lambie) complained that the Government had not increased the percentage grant from 68·5 per cent. I understood that he was suggesting that it should not have been kept constant, that we should feel no satisfaction over the fact that it was kept constant. He might like to know that the only time when that grant was reduced was during the period in office of the last Labour Government, as a result of the public expenditure cuts imposed by the IMF.
The hon. Gentleman also mentioned that revaluation in England and Wales had been cancelled, but the fact is that no revaluation is due in Scotland for some time. My right hon. Friend will take a decision on that matter at the appropriate time. The hon. Gentleman need have no fear about the effect on rate support grant. It has had not the slightest effect on rate support grant in England and Wales this year, nor will it have any effect in Scotland.
My hon. Friend the Member for Aberdeen, South (Mr. Sproat) pointed out the particular needs of the Grampian region as regards extraordinary expenditure which is oil-related. We have been able to maintain the special help given to those areas that have had special oil-related expenditure. I am glad that my hon. Friend welcomes this.
The hon. Member for Glasgow, Cathcart (Mr. Maxton) raised the question of education and complained about the provision for further education. He must accept that a real increase for further educations provided for, at a time when other areas have had to suffer a real decrease. He should appreciate that that is


a very realistic and reasonable contribution when we are all experiencing great difficulties.
Equally, it is surely reasonable that, at a time when school rolls are falling dramatically, particularly at primary level, we should be able to ensure a reduction in expenditure on education and not thereby have a dramatic effect on standards. I think that any hon. Member, on either side of the House, will appreciate that as being a reasonable response to the present period of difficulties. We said that in Opposition, because any sensible person would recognise it as being desirable.
The whole tenor of the Opposition's case appears to be that there should be no restraints on public expenditure, no restrictions on local authority expenditure. They appear to wish to encourage

local authorities to spend more this year and next, and to encourage the use of more manpower. Yet we know that the major problem that local authorities face came about because the previous Government planned for 3 per cent. extra spending without providing a penny to meet it.

The right hon. Gentleman complained about the abatement of £36 million in the current year. He did not comment on the fact that local authorities were overspending by £49 million. That is a very important consideration.

Therefore, I have no hesitation in commending the order to the House and asking the House to give it its full and unqualified support.

Question put:—

The House divided: Ayes 262, Noes 215.

Division No. 139]
AYES
[11.52 pm


Aitken, Jonathan
Clegg, Sir Walter
Hamilton, Michael (Salisbury)


Alexander, Richard
Cockeram, Eric
Hannam, John


Alison, Michael
Colvin, Michael
Haselhurst, Alan


Ancram, Michael
Cope, John
Hastings, Stephen


Arnold, Tom
Cormack, Patrick
Hawksley, Warren


Aspinwall, Jack
Corrie, John
Heddle, John


Atkins, Rt Hon H. (Spelthorne)
Costain, A. P.
Henderson, Barry


Atkins, Robert (Preston North)
Cranborne, Viscount
Heseltine, Rt Hon Michael


Atkinson, David (B'mouth, East)
Critchley, Julian
Hicks, Robert


Baker, Kenneth (St. Marylebone)
Crouch, David
Higgins, Rt Hon Terence L.


Baker, Nicholas (North Dorset)
Dean, Paul (North Somerset)
Hill, James


Banks, Robert
Dorrell, Stephen
Hogg, Hon Douglas (Grantham)



Beaumont-Dark, Anthony
Dover, Denshore
Holland, Philip (Carlton)


Bendall, Vivian
Dunn, Robert (Dartford)
Hooson, Tom


Benyon, Thomas (Abingdon)
Durant, Tony
Howell, Ralph (North Norfolk)


Benyon, W. (Buckingham)
Eden, Rt Hon Sir John
Hunt, John (Ravensbourne)


Berry, Hon Anthony
Edwards, Rt Hon N. (Pembroke)

Jessel, Toby


Best, Keith
Eggar, Timothy
Johnson Smith, Geoffrey


Bevan, David Gilroy
Emery, Peter
Jopling, Rt Hon Michael


Biffen, Rt Hon John
Fairbairn, Nicholas
Kimball, Marcus


Blackburn, John
Fairgrieve, Russell
King, Rt Hon Tom


Body, Richard
Faith, Mrs Sheila
Kitson, Sir Timothy


Bonsor, Sir Nicholas
Fell, Anthony
Knight, Mrs Jill


Boscawen, Hon Robert
Fenner, Mrs Peggy
Knox, David


Bottomley, Peter (Woolwich West)
Finsberg, Geoffrey
Lamont, Norman


Boyson, Dr Rhodes
Fisher, Sir Nigel
Lang, Ian


Braine, Sir Bernard
Fletcher, Alexander (Edinburgh N)
Langford-Holt, Sir John


Bright, Graham
Fletcher-Cooke, Charles
Lawrence, Ivan


Brinton, Tim
Fookes, Miss Janet
Lawson, Nigel


Brocklebank-Fowler, Christopher
Forman, Nigel
Lee, John


Brown, Michael (Brigg &amp; Sc'thorpe)
Fox, Marcus
Le Marchant, Spencer


Browne, John (Winchester)
Fraser, Peter (South Angus)
Lennox-Boyd, Hon Mark


Bruce-Gardyne, John
Fry, Peter
Lester, Jim (Beeston)


Bryan, Sir Paul
Galbraith, Hon T. G. D.
Lloyd, Peter (Fareham)


Buchanan-Smith, Hon Alick
Garel-Jones, Tristan
Loveridge, John


Buck, Antony
Glyn, Dr Alan
Luce, Richard


Bulmer, Esmond
Goodhew, Victor
Lyell, Nicholas


Burden, F. A.
Goodlad, Alastair
McCrindle, Robert


Butcher, John
Gorst, John
Macfarlane, Neil


Butler, Hon Adam
Gow, Ian
MacGregor, John


Cadbury, Jocelyn
Gower, Sir Raymond
MacKay, John (Argyll)


Carlisle, John (Luton West)
Grant, Anthony (Harrow C)
Macmillan, Rt Hon M. (Farnham)


Carlisle, Kenneth (Lincoln)
Gray, Hamish
McNair-Wilson, Michael (Newbury)


Carlisle, Rt Hon Mark (Runcorn)
Greenway, Harry
McNair-Wilson, Patrick (New Forest)


Chalker, Mrs. Lynda
Grieve, Percy
McQuarrie, Albert


Chapman, Sydney
Griffiths, Eldon (Bury St Edmunds)
Major, John


Churchill, W. S.
Griffiths, Peter (Portsmouth N)
Marland, Paul


Clark, Hon Alan (Plymouth, Sutton)
Grylls, Michael
Marlow, Tony


Clark, Sir William (Croydon South)
Gummer, John Selwyn
Marshall, Michael (Arundel)


Clarke, Kenneth (Rushcliffe)
Hamilton, Hon Archie (Eps'm &amp; Ew'll)
Marten, Neil (Banbury)




Mather, Carol
Price, David (Eastleigh)
Stewart, John (East Renfrewshire)


Mawhinney, Dr Brian
Prior, Rt Hon James
Stradling Thomas, J.


Maxwell-Hyslop, Robin
Proctor, K. Harvey

Tebbit, Norman


Mayhew, Patrick
Raison, Timothy
Temple-Morris, Peter


Mellor, David
Rathbone, Tim
Thompson, Donald


Meyer, Sir Anthony
Rees, Peter (Dover and Deal)
Thorne, Neil (Ilford South)


Miller, Hal (Bromsgrove &amp; Redditch)
Rees-Davies, W. R.
Thornton, Malcolm


Mills, lain (Meriden)
Renton, Tim
Townend, John (Bridlington)


Mills, Peter (West Devon)
Rhodes James, Robert
Townsend, Cyril D. (Bexleyheath)


Miscampbell, Norman
Ridley, Hon Nicholas
Trippier, David


Mitchell, David (Basingstoke)
Ridsdale, Julian
Trotter, Neville


Moate, Roger
Rifkind, Malcolm
van Straubenzee, W. R.


Monro, Hector
Roberts, Michael (Cardiff NW)
Vaughan, Dr Gerard


Montgomery, Fergus
Roberts, Wyn (Conway)
Viggers, Peter


Moore, John
Rost, Peter
Waddington, David


Morris, Michael (Northampton, Sth)
Sainsbury, Hon Timothy
Wakeham, John


Morrison, Hon Charles (Devizes)
St. John-Stevas, Rt Hon Norman
Waidegrave, Hon William


Morrison, Hon Peter (City of Chester)
Scott, Nicholas
Walker, Rt Hon Peter (Worcester)


Murphy, Christopher
Shaw, Michael (Scarborough)
Walker, Bill (Perth &amp; E Perthshire)


Myles, David
Shelton, William (Streatham)
Waller, Gary


Neale, Gerrard
Shepherd, Colin (Hereford)
Ward, John


Needham, Richard
Shepherd, Richard (Aldridge-Br'hills)
Warren, Kenneth


Nelson, Anthony
Shersby, Michael
Watson, John


Neubert, Michael
Silvester, Fred
Wells, John (Maidstone)


Onslow, Cranley
Sims, Roger
Wheeler, John


Oppenheim, Rt Hon Mrs Sally
Skeet, T. H. H.
Whitney, Raymond


Osborn, John
Smith, Dudley (War. and Leam'ton)
Wickenden, Keith


Page, John (Harrow West)
Speed, Keith
Wiggin, Jerry


Page, Rt Hon Sir R. Graham
Speller, Tony
Wilkinson, John


Parkinson, Cecil
Spence, John
Williams, Delwyn (Montgomery)


Parris, Matthew
Spicer, Jim (West Dorset)
Winterton, Nicholas


Patten, Christopher (Bath)
Spicer, Michael (S Worcestershire)
Wolfson, Mark


Patten, John (Oxford)
Sproat, lain
Young, Sir George (Acton)


Pattie, Geoffrey
Squire, Robin
Younger, Rt Hon George


Pawsey, James

Stainton, Keith



Percival, Sir Ian
Stanbrook, Ivor
TELLERS FOR THE AYES:


Pink, R. Bonner
Steen, Anthony
Lord James Douglas-Hamilton and



Pollock, Alexander
Stevens, Martin
Mr. Peter Brooke.


Porter, George
Stewart, Ian (Hitchin)





NOES


Adams, Allen
Davies, Rt Hon Denzil (Llanelli)
Grant, George (Morpeth)


Allaun, Frank
Davies, Ifor (Gower)
Grant, John (Islington C)


Alton, David
Davis, Clinton (Hackney Central)
Hamilton, W. W. (Central Fife)


Archer, Rt Hon Peter
Davis, Terry (B'rm'ham, Stechford)
Hardy, Peter


Armstrong, Rt Hon Ernest
Deakins, Eric
Harrison, Rt Hon Walter


Ashley, Rt Hon Jack
Dean, Joseph (Leeds West)
Hart, Rt Hon Dame Judith


Ashton, Joe
Dempsey, James
Haynes, Frank



Atkinson, Norman (H'gey, Tott'ham)
Dewar, Donald
Healey, Rt Hon Denis


Bagier, Gordon A. T.
Dixon, Donald
Heffer, Eric S.


Barnett, Guy (Greenwich)
Dobson, Frank
Hogg, Norman (E Dunbartonshire)


Beith, A. J.
Dormand, Jack
Holland, Stuart (L'beth, Vauxhall)


Benn, Rt Hon Anthony Wedgwood
Douglas, Dick
Home Robertson, John


Bennett, Andrew (Stockport N)
Douglas-Mann, Bruce
Horam, John


Booth, Rt Hon Albert
Dubs, Alfred
Howell, Rt Hon Denis (B'ham, Sm H)


Boothroyd, Miss Betty
Dunn, James A. (Liverpool, Kirkdale)
Hudson Davies, Gwilym Ednyfed


Bray, Dr Jeremy
Dunnett, Jack
Hughes, Robert (Aberdeen North)


Brown, Hugh D. (Provan)
Dunwoody, Mrs Gwyneth
Hughes, Roy (Newport)


Brown, Robert C. (Newcastle W)
Eadie, Alex
Janner, Hon Greville


Brown, Ronald W. (Hackney S)
Eastham, Ken
Jay, Rt Hon Dougias


Brown, Ron (Edinburgh, Leith)
Ellis, Raymond (NE Derbyshire)
John, Brynmor


Buchan, Norman
Ellis, Tom (Wrexham)
Johnson, James (Hull West)


Callaghan, Jim (Middleton &amp; P)
English, Michael
Johnston, Russell (Inverness)


Campbell, Ian
Evans, loan (Aberdare)
Jones, Barry (East Flint)


Campbell-Savours, Dale
Evans, John (Newton)
Jones, Dan (Burnley)


Canavan, Dennis
Ewing, Harry
Kaufman, Rt Hon Gerald


Carmichael, Neil
Field, Frank
Lambie, David


Carter-Jones, Lewis
Flannery, Martin
Lamond, James


Cartwright, John
Fletcher, Ted (Darlington)
Leadbitter, Ted


Clark, Dr David (South Shields)
Foot, Rt Hon Michael
Leighton, Ronald


Cocks, Rt Hon Michael (Bristol S)
Ford, Ben
Lestor, Miss Joan (Eton &amp; Slough)


Cohen, Stanley
Forrester, John
Lewis, Arthur (Newham North West)


Coleman, Donald
Foster, Derek
Lewis, Ron (Carlisle)


Concannon, Rt Hon J. D.
Foulkes, George
Litherland, Robert


Conlan, Bernard
Fraser, John (Lambeth, Norwood)
Lofthouse, Geoffrey


Cook, Robin F.
Freeson, Rt Hon Reginald
Lyons, Edward (Bradford West)


Craigen, J. M. (Glasgow, Maryhill)
Freud, Clement
Mabon, Rt Hon Dr J. Dickson


Crowther, J. S.
Garrett, John (Norwich S)
McDonald, Dr Oonagh


Cryer, Bob
George, Bruce
McElhone, Frank


Cunliffe, Lawrence
Gilbert, Rt Hon Dr John
McGuire, Michael (Ince)


Cunningham, George (Islington S)
Ginsberg, David
McKay, Allen (Penistone)


Cunningham, Dr John (Whitehaven)
Golding, John
McKelvey, William


Dalyell, Tam
Gourlay, Harry
MacKenzie, Rt Hon Gregor


Davidson, Arthur
Graham, Ted
Maclennan, Robert







McMahon, Andrew
Penhaligon, David
Straw, Jack


McMillan, Tom (Glasgow, Central)
Powell, Raymond (Ogmore)
Taylor, Mrs Ann (Bolton West)


McNally, Thomas
Prescott, John
Thomas, Mike (Newcastle East)


McWilliam, John
Price, Christopher (Lewisham West)
Thomas, Dr Roger (Carmarthen)


Marks, Kenneth
Race, Reg
Thorne, Stan (Preston South)


Marshall, David (Gl'sgow.Shettles'n)
Radice, Giles
Tilley, John


Marshall, Or Edmund (Goole)
Richardson, Jo
Tinn, James


Martin, Michael (Gl'gow, Springb'rn)
Roberts, Allan (Bootle)
Torney, Tom


Maxton, John
Roberts, Ernest (Hackney North)
Varley, Rt Hon Eric G.


Maynard, Miss Joan
Robertson, George
Wainwright, Edwin (Deerne Valley)


Meacher, Michael
Rodgers, Rt Hon William
Walker, Rt Hon Harold (Doncaster)


Mikardo, Ian
Roper, John
Watkins, David


Millar,, Rt Hon Bruce
Ross, Ernest (Dundee West)
Weetch, Ken


Mitchell, Austin (Grimsby)
Rowlands, Ted
Wellbeloved, James


Mitchell, R. C. (Soton, Itchen)
Sever, John
Welsh, Michael


Morris, Rt Hon Alfred (Wythenshawe)
Sheerman, Barry
White, Frank R. (Bury &amp; Radeliffe)


Morris, Rt Hon Charles (Openshaw)
Shore, Rt Hon Peter (Step and Pop)
White, James (Glasgow, Pollok)


Morris, Rt Hon John (Aberavon)
Silkin, Rt Hon John (Deptford)
Whitlock, William


Morton, George
Silkin, Rt Hon S.C. (Dulwich)
Williams, Rt Hon Alan (Swansea W)


Moyle, Rt Hon Roland
Silverman, Julius
Wilson, Gordon (Dundee East)


Mulley, Rt Hon Frederick
Smith, Rt Hon J. (North Lanarkshire)
Wilson, William (Coventry SE)


Newens, Stanley
Snape, Peter
Winnick, David


Oakes, Rt Hon Gordon
Soley, Clive
Woodall, Alec


Ogden, Eric
Spearing, Nigel
Woolmer, Kenneth


O'Neill, Martin
Spriggs, Leslie
Wrigglesworth, Ian


Owen, Rt Hon Dr David
Steel, Rt Hon David
Young, David (Bolton East)


Park, George
Stewart, Rt Hon Donald (W Isles)



Parker, John
Stoddart, David
TELLERS FOR THE NOES:


Pavitt, Laurie
Stott, Roger
Mr. Hugh McCartney and


Pendry, Tom
Strang, Gavin
Mr. James Hamilton

Question accordingly agreed to.


Resolved,


That the Rate Support Grant (Scotland) Order 1979, a copy of which was laid before this House on 28 November, be approved.

VALUE ADDED TAX

The Minister of State, Treasury (Mr. Peter Rees): I beg to move,
That the Value Added Tax (International Services) (No. 2) Order 1979 (S.I.,), 1979, No. 1554), a copy of which was laid before this House on 3 December, be approved.
The order exempts from VAT supplies of certificates of deposit made to persons outside the European Community and the Isle of Man. The change means that from the date of the operation of the order supplies of certificates of deposit will be exempt where they are made to persons in the United Kingdom or elsewhere. The order is necessary to stop a loss of revenue resulting from the zero rating of supplies of certificates of deposit when made to persons outside the European Community and the Isle of Man.
A certificate of deposit is a form of security which is defined in the Exchange Control Act 1947. There is a note in the order to be attached to schedule 4 to the Finance Act 1972 defining it. In short, it is a form of receipt which may be issued when a deposit of money is lodged with a bank at a fixed rate of interest for a fixed period of time. It is a negotiable document and may be traded for its face value, plus the accrued interest during its currency before final redemption. Banks and other institutions whose business is not wholly or mainly the dealing in securities are allowed, under the VAT general regulations, to disregard the value of such supplies in calculating their deductible input tax. As from 1 January 1978, an alteration was made which would allow dealings in securities such as the certificates of deposit in which there is a growing trade for very large amounts to be zero rated so that the banks' inputs could be set against their taxable outputs. This has resulted in the recovery of input tax by banks and similar institutions at a rate of £20 million a year and is almost entirely due to certificates of deposit.
This was not contemplated by the House or the Customs and Excise when the original orders were introduced, because the true input tax relative to a certificate of deposit is negligible—it is merely the VAT on paper and the overheads. Under the calculations made for determining the amount of the input tax

to be recovered, the full value of the zero-rated certificate of deposit enters into the calculation. There have been detailed discussions with the British Bankers Association, with the consultancy committee of the accountancy bodies, with the Unit Trust Association and the Association of Investment Trusts. They all agree in fairness that this drain on the Exchequer should be staunched.
Those institutions whose main business is dealing in securities—such as unit trusts and investment trusts—have to take their exempt and their zero-rated supplies into account in compiling their VAT returns, so that there is no artificial distortion as in the case of banks. On that basis, I hope that the House will recognise that this is a modest order that will prevent a drain on the Exchequer, and I hope that after due exploration hon. Members will approve it tonight.

Mr. John Horam: I am delighted that the Minister of State has made a speech tonight. We were rather disappointed late last night when the hon. and learned Gentleman did not appear at the time to know exactly what were his responsibilities in respect of the Third Reading of the Petroleum Revenue Tax Bill. We were deprived of his Pickwickian charm and enchanting flow of rhetoric, to which the House is accustomed on these occasions, and also deprived of our opportunity of asking him further questions about PRT.
When I saw the prominence with which the Isle of Man featured, I thought that perhaps we were to pursue some fascinating tax loophole, well known to the hon. and learned Gentleman in his previous capacity—perhaps one that he even helped to exploit—which, as poacher turned gamekeeper, he was about to destroy for all his erstwhile clients. That is not the case. We are dealing with certificates of deposit which are basically negotiable receipts given by banks for money deposited with them.
The hon. and learned Gentleman explained that before 1 January 1978 these deposits—the international, not the domestic, version—were an exempt category for VAT purposes. However, on 1 January 1978, to conform with EEC law, international deposits of this kind became zero rated, That meant that banks could reclaim VAT paid on them and, since


they involved very large sums—the certificates of deposits are denominated in very large sums—they would have reclaimed a large amount of tax on them. Therefore, the Customs and Excise, I presume, argued that that was unfair and it wished in this order to revert to the pre-1978 system of exempting rather than zero rating them.
The Opposition accept that this is a sensible order and do not intend to oppose it. But why was it not apparent in 1978 to the Customs and Excise that the result that we have seen would flow from the order that was laid at that time? Why did it make the change on 1 January 1978 with the consequences that it wishes to reverse so soon afterwards? I am sure that it will say that it did it to comply with EEC law. If so, why does it now have to change back? Is it now out of line with EEC law as a result of changing back? What is the practice in other EEC countries which presumably are subject to the same EEC rules and regulations as the United Kingdom? It seems odd that the Customs and Excise should have done a U-turn so rapidly on this point. Perhaps the hon. and learned Gentleman will be able to enlighten the House briefly on that matter.
Secondly, will the result of the order in any way affect the supply of these deposits, or will it merely affect the profits or the tax paid by the banks?
Finally, are very large sums involved? I take it that the point of the order is that there is a loophole of which the banks are taking advantage to increase their profitability. We know that bank profits have been extremely high in the past year or two. Are very large sums involved, or are we talking about relatively small amounts?
I do not expect the hon. and learned Gentleman to answer those three matters immediately—he may not have the figures to hand—but I hope that he will make a stab at enlightening the House on them.

Mr. Peter Rees: I am flattered that the Opposition should be so keen to hear my rhetoric, even at a late hour. I should be the last person—although perhaps the Patronage Secretary may have a different view—to cheat them of these opportunities. It is not perhaps for me to go over

the events of last night. I am deeply sorry if the hon. Member for Gateshead, West (Mr. Horam) or his hon. Friends did not have an opportunity to air their views on what was admittedly an important matter. We had a Second Reading debate and a full Committee stage upstairs. However, that is now history.
I note and register with appreciation what the hon. Gentleman said, and I assure him that, in so far as it lies in his power, on future occasions he will always hear my rhetoric if he is minded to do so.
I congratulate the hon. Gentleman on his lucid and succinct analysis of an admittedly extremely complex, if narrowly defined, area.
The hon. Gentleman asked three questions, and I am happy to respond to all of them here and now, because they were—dare I say—exactly the same questions as I put to the Customs and Excise when I was attempting to master this intricate subject.
The hon. Gentleman asked why this point was not apparent in 1978. If I were not such a generous-spirited person, I might say that that was a question more appropriately to be directed to those who were occupying this Front Bench in the years before 3 May last year. Indeed, he might have asked his right hon. Friend the Member for Llanelli (Mr. Davies), who perhaps could have given him a more appropriate answer. I put that question to the Customs and Excise, and, in particular, I asked what the trade in sterling certificates of deposit had been.
The figures can be extracted from the Bank of England statistics, although there is no precise breakdown between the trade in certificates of deposit inside the Community, plus the Isle of Man, and outside. I hope that the hon. Gentleman will forgive me for that. We have not been able to make a precise breakdown but he can cross-check agains the Bank's statistics.
However, I will give the figures that I have. In 1975 the trade was about £3,000 million; in 1976 it was £3,340 million; in 1977 it was £4,640 million; in 1978 it was £3,810 million, and in 1979 it was £3,850 million. So they were fairly considerable sums.
The hon. Gentleman then asked me whether we would be out of line with


the sixth directive. It is important to reassure ourselves that there is no breach of our obligations there, and I am happy to assure the hon. Gentleman that this is not so.
I was then asked whether the profits of the Bank would be affected. I do not think they will, except in the sense that the Bank will not be able to recover its inputs on this range of transactions. In the sense of gross profits the answer is "Yes", but in the sense of profits for corporation tax purposes the answer is "No".
It is thought that we shall be preventing banks and similar institutions from setting about £20 million of inputs against their outputs—that is, about £20 million in VAT. By reference to the enormous sums that we are accustomed to bandy across the Dispatch Box when we discuss public expenditure, that is not a large sum. None the less, I hope that the House and the Opposition will consider that it is worth moving this modest order to staunch this flow.
I hope that I have reassured the hon. Gentleman, who, with his customary courtesy and lucidity, has explored this problem for the Opposition. On that basis, I hope that the House will approve this modest yet important order.

Question put and agreed to.

Resolved,
That the Value Added Tax (International Services) (No. 2) Order 1979 (S.I., 1979, No. 1554), a copy of which was laid before this House on 3 December, be approved.

ADULT EDUCATION

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Morrison.]

Mr. Stephen Dorrell: I am grateful to the House for this opportunity to raise the subject of adult education, which I believe is of increasing interest to several hon. Members in the House and will come increasingly to the fore in several constituencies up and down the country in the next few months.
The first movement towards that increase in interest is reflected by the fact that during the past two or three months a number of Back Benchers have grouped

together to pursue the interests of adult education in the House. My hon. Friend the Member for Ealing, North (Mr. Greenway), who I understand will be seeking to catch your attention later in the debate, Mr. Deputy Speaker, is the chairman of that group of Members of Parliament and is responsible for articulating some of the concerns that are shared by Back Benchers interested in this subject.
I begin by making clear my objective in raising this subject in the House this evening. I am not asking my hon. Friend the Minister for detailed statistics on the level of spending by local education authorities on adult education nor am I asking him to defend the particular spending decisions which local education authorities may or may not have made. My hon. Friend will rightly tell me that local educiation authorities are the primary decision-making machines on adult education matters and must carry the responsibility for their own decisions. However, I believe that the Government have an important contribution to make, not so much by making individual spending decisions but by creating the political environment in which those decision are made. Many of us feel that adult education lacks a clear political commitment from the top about the underlying value of the work of that sector. That is not something that has come forward in the last few months. The whole sector has been drifting for the last two or three years. What is needed is a new top-level commitment to the ideas, aims and goals of adult education.
Some of the spending decisions that have been taken by local education authorities in the past four or five months reflect a lack of political will and direction. I shall mention one or two of the more publicised examples.
My hon. Friend will know that Humberside, West Glamorgan and Hampshire have all imposed, at one time or another, a total suspension of adult education activity. Nottinghamshire, the county next door to my own, has imposed cuts that will reduce the number of places offered to adults by approximately 80 per cent. My own county of Leicestershire has, perhaps, been less swingeing than most in the cuts that it has applied, but I was told this morning that the local people involved in adult education expect


a drop in student numbers of about 25 per cent. to 30 per cent.

Mr. Barry Sheerman: I have for many years been a tutor in adult education, via the University of Wales extramural department and in many other ways—the WEA, and so on—and I am surprised to hear what the hon. Gentleman says. He refers to West Glamorgan, where I was a lecturer in various subjects in adult education. I had the interesting experience of talking to a broad range of talented people who had never had the opportunity of education in the conventional sense, and they were dependent on a very small element of higher education grant which was taken away from them by the Government of which the hon. Gentleman is a supporter.
I heartily support the hon. Gentleman in having an Adjournment debate tonight on higher education, and I have in mind especially those who have not had the opportunity of grants, who have not got A-levels, O-levels and the rest. But these are the people who are bereft of help at the present moment, and it surprises me that the hon. Gentleman can be so passionate at a time when his own Government are taking away the very cash which gives help, succour and joy to a wide range of people.

Mr. Deputy Speaker (Mr. Richard Crawshaw): Order. I know that the hon. Gentleman is a new Member, but I must tell him that it is not customary to intervene in an Adjournment because it is such a short debate, and, if the hon. Member whose debate it is gives way, it is not customary to intervene at undue length.

Mr. Dorrell: The hon. Gentleman makes a fair point but not, I think, an accurate one, because I said at the outset that I was not concerned about the particular application of specific spending decisions because that is not a subject which is directly the responsibility of my hon. Friend the Minister or of the House. What is the responsibility of the House and of my hon. Friend is the political environment in which those decisions are made. That is why I ask my hon. Friend to make clear tonight—or at some other time if he cannot do it now—the Government's underlying political commitment

to the aspirations of adult education so that decisions of that kind are taken in an atmosphere more positive towards the ideas to which the hon. Member has given expression.
Adult education is nothing very new, and certainly my party's political commitment to it is nothing at all new. Anyone who is involved in the adult education world, as the hon. Gentleman was, will be well aware of the letter written by Winston Churchill to the TUC in 1953 in which he said:
There is perhaps no branch of our vast education system which should more attract within its particular sphere the aid and encouragement of the State than adult education.
I am asking the present Government to renew the commitment which Winston Churchill gave in 1953 and underline their attachment to the idea which he then embraced.
I turn now to one or two aspects of this subject. The hon. Member for Huddersfield, East (Mr. Sheerman) was, I thought, a bit scathing about this Government's record in adult education, so perhaps I should begin by speaking briefly about what they have done in the basic education of adults, because here they have, I think, already made a start down the road which I suggest they take.
In a parliamentary answer to me on 17 December, the Secretary of State announced that the adult literacy unit was to continue for a further three years and that the funding of this unit was to be increased from £330,000 to £½ million.
That does not fit in with a picture of total cutbacks on all forms of adult education. My right hon. and learned Friend announced also in accepting many of the recommendations in the report of the Advisory Council for Adult and Continuing Education that the adult literacy unit would be extended to cover a wider range of basic skills.
I warmly welcome that, though I enter one caveat. I hope that that commitment at the centre will be reflected in the local education authorities, for there is not much point in having that commitment to the adult literacy unit if at the same time we do not have the commitment in the local education authorities at the sharp end to carry out the ideas that the literacy unit is supposed to be propagating.
Adult education is not primarily about basic education. It is concerned fundamentally with the much wider subject of the development of knowledge, skills, judgment and creativity for each citizen throughout adult life. I hope that the Minister's statement will emphasise that adult education is concerned not merely with the use of leisure time. Nor is it confined to the way in which a few privileged persons use their evenings to enjoy themselves. It is about providing an opportunity for all our citizens to develop throughout life. We must move away from the idea that education ends when we leave school, whether that be at 16 years, 18 years or, for the lucky few, when they leave university at 21 years. Education is a continuing and permanent process.
It is necessary that that is made clear for two reasons. First, there is the purely utilitarian reason that we are short of talent. We do not have talent to waste. We cannot afford to allow those who are late developers to fall by the wayside. We need their talents. We need them to contribute to the economy. We need to encourage upward mobility so that extra skills may be acquired and the quality of the population is developed and is better able to contribute to a fast-changing society.
Secondly, we need to provide a second chance for those who do not take full advantage of their time at school, for whatever reason. We need to provide an opportunity for people to improve later in life and to improve the contribution that they make to our society.
Those are utilitarian arguments. However, adult education is also concerned with the development of a free society. The development of the individual and the improvement of the contribution that he can make is not confined to improving the economy. It is also concerned with everything that the Conservative Party has stood for—namely, higher individual attainment and the pursuit of excellence. That is a process that cannot stop at 18 years. It is something that should be pursued throughout adult life.
If that is the role that we understand for adult education, it cannot be regarded merely as a commercial enter-

prise. The public funds education for the primary, secondary and university sectors because it sees public benefits coming from that funding. Individuals benefit, but the public benefit as well. That is equally true of the adult education sector. We accept that if cuts are to be made in other sectors of public expenditure they must affect adult education too. However, we argue that they should not affect it disproportionately.

Mr. Harry Greenway: I congratulate my hon. Friend the Member for Loughborough (Mr. Dorrell) on his initiatives in this important area. I thank him for accommodating me for a few moments in this Adjournment debate.
I speak as the chairman of the new all-party committee on adult education. The committe has already had two meetings and it is getting down to business. It looks forward to making a contribution in the important sector of adult education. I have had 15 years' experience of adult education. I have worked in this field in addition to my other big jobs in education.
Clearly, schoolchildren and young people in colleges and universities should come first. However, we must try unremittingly to establish and maintain throughout the nation a firm infrastructure for adult education upon which, when the economy is stronger, can be set up those vital classes for older people, young mothers, the increasing number of early retirers, the unemployed, the illiterate, those with increasing leisure time and others in every walk of life with active minds and bodies who seek stimulating and/or relaxing courses which can come only through the adult education service.
Such people make keen students. As my hon. Friend the Member for Loughborough said, some of those people may well have not made the most of their schooling and have to come to understand the need for education later in life than many of us. Whether they are late developers or people within the categories that I have described, they are keen students who want to learn. They inspire, among those who teach them, keen tutors. Such tutors give a service that makes adult education probably the most cost-effective sector of education, public or private. The tutors are paid by the hour,


but they give their time freely for travelling and lesson preparation before and after classes.
Authorities throughout the country, but particularly Inner London and notably Ealing of the outer London boroughs, have long had a good record in adult education. If a local authority offers a good adult education service, it reaches the whole community. Although people do not necessarily enrol every year, in an area near this House research has shown that 20,000 people have enrolled for adult education courses over the past three years, whereas the annual enrolment has been 9,000 a year. Notable people in this matter in London—Joan Adams, Jimmy Maple, Peter Clyne, Sidney Hearen and others—are equipped to comment on the situation. On adult education they say:
We touch a large part of the community.
Any of us, just by talking to people, can usually discover in that conversation that people have attended a class in adult education at some time or another. I should like to see, as soon as possible and by whatever means possible, daytime classes, as well as evening classes, increasing in academic, physical education and vocational areas. Over 2,000 classes in the small region that I have referred to are held in the daytime. The adult education institute concerned has some accommodation of its own, but it has to work hard to find extra accommodation. Such accommodation should become increasingly available as school rolls fall and premises are vacated. Not all schools will easily be sold and some might well be saved for the purposes of adult education. They would make a valuable contribution.
I should like to continue the quotation that was started by my hon. Friend the Member for Loughborough from what Sir Winston Churchill said to the Trades Union Congress in 1953, in the context of the post-war situation:
How many must there be in Britain, after the disturbance of two destructive wars, who thirst in later life to learn about the humanities, the history of their country, the philosophies of the human race, and the arts and letters which sustain and are borne forward by the ever-conquering English language? This ranks in my opinion far above science and technical instruction, which are well sustained and not without their rewards in our

present system. The mental and moral outlook of free men studying the past"—
as well as the present, I would add—
with free minds in order to discern the future demands the highest measures which our hard-pressed finances can sustain.
I have no doubt myself that a man or woman earnestly seeking in grown-up life to be guided to wide and suggestive knowledge in its largest and most uplifted sphere will make the best of all the pupils in this age of clatter and buzz, of gape and gloat".
This, for me, is the crunch of his remarks:
The appetite of adults to be shown the foundations and processes of thought will never be denied by a British administration cherishing the continuity of our island life.
No Administration cherishes our island life more than the present Government. We have a deeply patriotic Government and I am confident that they will do all they can for adult education and thereby for the true fulfilment of our people.

The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I am pleased that my hon. Friend the Member for Loughborough (Mr. Dorrell) has chosen the topic of adult education for the Adjournment. The last time that we spoke together was in a school meeting during the general election. I first met my hon. Friend the Member for Ealing, North (Mr. Greenway) when we were in the Oxford university settlement in Mope Street, Bethany Green. Both of us were then involved in the teaching profession.
My hon. Friend the Member for Loughborough asked whether the Government's commitment carried on that of previous Conservative Governments to adult education. I reassure him that that is so. We believe that expenditure on adult education is one of the most purposeful and productive aspects of all education expenditure.

Mr. Sheerman: Does the Minister accept that it was the Labour Government of 1966 who pushed the Open University through Parliament? Surely that is the greatest contribution to adult education that the country has ever known. I seem to remember that the Conservative Party was in two minds about whether to support that great advance.

Dr. Boyson: The greater product of adult education is the Workers Educational Association. I welcome the Open


University, but the Workers Educational Association has battled on for over 60 years. If the Open University does as well as that association after 60 or 70 years, I shall agree with the hon. Member for Huddersfield, East (Mr. Sheerman).
We did have doubts about the Open University. All rational men have doubts from time to time. We looked at the proposition, but we were not sure whether it would be successful. That does not seem to indicate an irrational frame of mind. When my right hon. Friend the Pirme Minister was Secretary of State for Education and Science in 1970, she came to the conclusion that the Open University was doing a good job. As the Open University is now within my sphere of responsibility, it was one of the first places that I visited upon taking office. I am convinced that the money spent on the Open University is well spent, and I agree that it is part of adult education.
There are three facets to adult education, all of which have been covered by my hon. Friend the Member for Loughborough. First, there is the technological facet, in which the Open University plays its part. Because of the rapid change in technology and industry, not only do we require a well-educated population possessing the basic skills, but special skills need to be ret aught from time to time. There also needs to be the development of new skills that are flexible to new demands if we are to attain the economic revival that we all seek.
Secondly, the remedial or balanced aim of adult education is for children who leave our schools to be able to read and write. We have by no means reached that stage. I have talked to people about the figures for adult illiteracy. Adult education has a role to play in remedial education, because people can return to education when they feel the need for literacy and numeracy. I am particularly sympathetic to that need, and facilities are provided to those people so that they can learn skills for their own satisfaction, as part of their job, and to make up for something that they missed when they were at school. The same consideration applies to the minor ethnic groups. Many of these people require the skills of numeracy and literacy to enable them to fit into our society. This applies also to the boat people who have recently arrived

here. The older ones would gain from adult education.

Mr. Dorrell: I welcome my hon. Friend's statement. I said that the Government had made a good start on adult literacy. I ask my hon. Friend to address himself to the problem that arises when the Government put funds into the adult literacy unit but some local authorities reduce their spending at the sharp end on those objectives.

Dr. Boyson: I shall come to that when I have completed what I want to say on the other matter.
There is a third need that has to be met, and that is self-fulfilment. It means that people can go to classes similar to the old WEA classes in literature and history and in that way gain a further insight into the society in which they live. That is a justifiable expenditure.
I shall come in a moment to our commitment to adult education and compare the figures for this year with those for last year.
Let me deal with the rate support grant. It is not just a question of adult education. One has to consider also stationery, books, and so on. Once money has been put into the rate support grant, one has to reply upon the local authority and public opinion within that authority to ensure that the money provided for adult education is used in that way. That can be done only by creating the proper climate of opinion.
Where cuts have to be made—and in many cases they have to be—one must ensure that that is done. After all, we were elected to bring the economy into balance. That is something in which all of us on this side believe. Special cases are difficult to deal with. Everyone is a special case if one allows it.
It is essential that local authorities do not cut so near the bone that we cannot get the situation going again once we put more flesh on. That is the first important point to make. Secondly, voluntary associations and voluntary bodies have an important role to play. The WEA is one such body. A local education authority must not just keep its own classes going and run down the funds that go to voluntary bodies, because in many cases those bodies meet the demands of people in the area and can


expand most easily when the situation eases economically.
I must make a point about guidance to local authorities. I understand that the Advisory Council for Adult and Continuing Education hopes to provide indications of practical ways in which provision is being maintained at local level within reduced budgets. I think that that would meet the point raised by my hon. Friend about what is happening where cuts have to be made but where there has been a retention of the standards that had been achieved.
I am sure that my hon. Friend will be glad to hear that there will be no reduction in grant-aid from the Department to bodies such as the WEA and university extra-mural departments, which are also grant-aided by the local authorities and which supplement LEA provision. We intend to provide the same amount of money in 1980–81 as has been provided this year, so there will be no reduction in adult education. That shows that we believe in adult education. We are providing real money for this purpose.

Mr. Greenway: To that I say three cheers.

Dr. Boyson: That was a very pleasant intervention. If the hon. Member for Huddersfield, East wants to intervene and give only one cheer, I shall gladly give way.
Just before Christmas, my right hon. and learned Friend the Secretary of State announced that he had decided to extend the term of the Advisory Council for Adult and Continuing Education for a further three years beyond October 1980, to which it was timed, to enable it to complete its important work of reviewing current practice and the means of most effectively deploying existing resources and of identifying the policies and priori-

ties which it considers important for the evaluation of a coherent pattern of provision in tune with present and future needs.
Similarly, just before the Christmas Recess, we took an initiative with the adult literacy unit—with which I have had many conversations—for the development after March of the unit into one with a wider remit, covering not only literacy but other related basic skills. Although my right hon. and learned Friend felt able to give central support, it is particularly important to mention tonight that we are providing the same funds as before. We have given it another three years. We are working very closely with it.
In particular, we want to move the adult literacy unit into a basic education of adults unit, where it will cover proficiency in areas such as literacy, numeracy and communication, without which people are impeded in applying or even being considered for employment. I have had a number of conversations with these people and I have no doubt that they are doing an excellent job. We shall watch carefully to see what further help we can give them. We have given them a budget of £500,000 in the first year, and we have promised its continuance over three years.
It gives me pleasure this evening to answer my hon. Friends and say that our commitment to adult education is clear. It has been shown financially. We have put our money where our beliefs are, by not cutting the amount going to adult education. If we can give a lead by saying that this is one of the priorities that must be maintained not just for the present but for the future—and that includes the Open University—I am sure that this debate will have been useful for all concerned.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to One o'clock